If you’re a small business owner or an aspiring entrepreneur, there will be situations surrounding you that can impact profitability where you may consider the options of merge, buy, or sell a business. Watch this video to learn the basics of mergers and acquisitions.
.embed-container { position: relative; padding-bottom: 56.25%; height: 0; overflow: hidden; max-width: 100%; } .embed-container iframe, .embed-container object, .embed-container embed { position: absolute; top: 0; left: 0; width: 100%; height: 100%; }

If there’s anything we all learned from 2020, it’s that things can change in a heartbeat and that the unexpected can create real havoc. Though there’s nothing you can do to stop fate’s freight trains from barreling down the tracks, there are steps you can take to minimize the stress you feel in its aftermath. One of those steps is both simple and remarkable in the power of its impact: Start paying your bills ahead of time, before they are due. At first glance, it may seem like paying bills early won’t change anything. But there are three important ways that it makes a big difference.
1. Boost your FICO® Score and your reputation while lowering your anxiety. Have you ever found yourself unable to log on to your credit card’s payment site on the day that a bill was due? Not only will paying early eliminate that nightmare from your life, but at the same time it will lift your FICO® Score. More than one third of your credit score is based on whether you pay your bills on time, so getting into the habit of paying early can help a lot, especially if you’ve fallen behind in the past. The other benefit that you can get from paying bills early is the boost you’ll give to the way your creditors view you. It’s known as a “halo” in the credit world, and though you may not think it makes a difference one way or another, imagine having always paid your rent ahead of time and then suddenly finding yourself short on funds, with a paycheck due two or three days after the rent’s due date. By having established a shiny halo for yourself, you have a much better chance of your landlord being willing to give you that two-or-three-day grace period that you need. And the halo isn’t limited to face-to-face creditors – it will also help you when it comes time to apply for a loan, as one of the first things a bank will look at within your credit score is your payment history. 2. Paying bills early costs less. If you’ve ever paid your bills past their due date, then you immediately know one of the ways that paying early helps: You eliminate the additional expense imposed by late fees. But in addition to avoiding that penalty, there are also significant incentives and rewards available for those who pay ahead of time. For one thing, eliminating late penalties will automatically lift your FICO® Score, and that means that you will likely qualify for lower interest rates on any loans you apply for, saving you plenty of money over the long term. Additionally, there are some creditors who offer discounts to those who pay early. Check your local tax bill to see if you can get a break for paying your real estate tax ahead of time. Some hospitals will offer a discount of 3% for paying early as well. 3. Paying early improves your “credit utilization.” Have you ever looked closely at your credit score and seen the term “credit utilization?” Most people don’t know what it means, but they should because it represents 30% of their score. It specifically refers to the amount of your available credit that you actually use. If you have a $5,000 spending limit on your credit card and your balance is $4,000, then your credit utilization is 80%. If your balance is $1,000 then your utilization is 20%. In the eyes of the banking world, a lower percentage of credit utilization makes you a safer risk and earns you a higher score. Banks don’t particularly like seeing utilization above 30%. That is not to say that you shouldn’t use the available credit that you have, but you do need to understand how it works. Credit utilization is based on a moment in time, and specifically on the last day of your billing cycle. Every month on this statement closing date, your creditor calculates how much interest you owe them for any unpaid balance as well as the minimum payment due for the month. On the same day they report to Equifax, Experian and TransUnion about how much you owe relative to your credit – your credit utilization. If you have paid down your bill before the statement closing date – even by only a little – it reduces the percentage of your credit utilization ratio. Most credit cards will indicate what your statement closing date is, but if it isn’t there then you can call customer service to find out. Just make sure that you remember that this early payment does not count towards the minimum payment due that will be reflected on your next month’s bill. You have to make a payment after the credit card statement has been generated for it to apply to that month’s payment. Even if you can’t pay your bill off in full each month, making a pre-closing date payment and a monthly minimum payment will help you lower your debt, and having the credit utilization lowered a bit will move the needle on your credit score.
Not everybody is able to pay their bills off every month, so trying to pay early can feel like an additional burden. However, making that small change is more about scheduling than about how much you pay – and it can really make a big difference. By starting with this step, you also can begin to think about your debt differently and start taking financial extras like bonuses, cash gifts or tax refunds and start using them to pay off bills.

Operating a restaurant is a dream for many, but there’s a lot more to it than meets the eye. There are far more restaurants and food-related businesses that fail than succeed, and that’s frequently because entrepreneurs spend more time focusing on front of house operations and food preparation than on the business and accounting side. Though it is not the flashy side of the business, accounting and bookkeeping is just as important as your menu, décor, and presentation, especially with the typical narrow profit margins seen in the restaurant business. To make your success more likely, take the information provided below to heart. Even better, get professional assistance from our office. Establishing a Smart Restaurant Bookkeeping Process

Get help The most important thing to do is hire a bookkeeper if you don’t know what you’re doing when it comes to restaurant bookkeeping – and preferably one who has specific experience in food and beverage accounting. The more your bookkeeper knows about the specifics of cost of goods sold, front-and-back-of-house operations and inventory management, the better. 
Arm your bookkeeper with the tools that they need This usually means purchasing a special software package that has been written with restaurants in mind. The more particular the package is, the easier it will make everybody’s life. Look for a program that allows you to make customized invoices, generate profit and loss statements, track your revenue, and review cash flow. It is also important that you can generate customized reports to track trends and that the program is cloud-based so that you can access the information on demand. 
Categorize your cash flow with a chart of accounts An experienced bookkeeper’s first step is likely to be setting up a chart of accounts that will track assets, expenses, liabilities, revenue, and equity, then break those categories down further into the various specific areas that are most important for you to keep track of. 
Select a Point-of-Sale system that works for your environment Retail operations have been transformed by state-of-the-art point-of-sale systems that tie every aspect of the business together. A robust program will do far more than generate receipts or place orders with the kitchen: it will also help with inventory management and tie into your sales reporting. System selection should be based on more than bells, whistles and capabilities. You also want to make sure that your entire team finds it intuitive and easy to work with. 

Keeping Your Eyes on The Right Information Food businesses have many different metrics that need to be tracked so you can have a clear picture of what is happening, where things are working well and what needs to be improved. The most important aspects of your business that you need to track include:

Inventory – Having an inventory management system will help you understand what is selling and what isn’t, as well as calculate the right pricing for items that are selling well. By tracking ingredients and supplies, you can take advantage of discounts, order using economies of scale, and avoid waste. 
Sales – Revenue is one of the most important aspects of running any business, and when it comes to restaurants it is essential that you know how much you are bringing in from different areas of your business, whether that is liquor and beverage sales as compared to food, dinner as compared to lunch and breakfast, or from catering as compared to in-house dining. 
Cash Management – Tracking cash coming in as compared to going out is the key to keeping your business afloat. It needs to be done every day, then repeated on a weekly and monthly basis so that you understand how your sales are trending and how to schedule your bill payments. 
Accounts Payable – Though paying vendors may be a struggle, especially at the beginning, making sure that you are doing so on a timely basis will ensure that you will continue getting the high-quality supplies that you need, when you need them. The best way to keep track of your liabilities is in your accounting software, which will help you schedule payments in a way that meets your obligations while also maximizing your cash flow. 
Payroll – One of the most important aspects of any restaurant’s success is the quality of their employees, both in the front of the house and in the back, but keeping track of payroll can be a challenge. Different staff members get paid on different wage structures, and there are complicated tax processes that are involved as well. With an estimated ten percent of the American workforce made up of restaurant employees, there are plenty of tools that have been developed to ensure that those 14.7 million working in the industry are getting paid the way that they should and that you are tracking them, whether they are part-time, full time, hourly, or salaried. 
Reconciliation – Reconciliation is the process of making sure that you have everything in your business operations and financial management properly accounted for, including your credit card bills, loans, bank accounts, and payroll. 

Reporting and Analysis If you are new to the restaurant business, there are specific calculations that you will need to make based upon the various reports and financial statements generated by your bookkeeper or accountant. Careful analysis of these calculations will provide you with invaluable information from which you can make decisions. They include: 

Cost of Goods Sold – This metric tells you what it is costing you to make the food that you are selling. You can calculate it by adding your initial inventory to your purchased inventory and then subtracting your existing inventory. As you can see, in the restaurant business costs are entirely based on the supplies and ingredients that are needed for the items that you are selling to your customers. This means that taking inventory is one of the most important tasks you will perform. It must be done regularly, and it must be accurate. 
Prime Costs – This metric accounts for both your cost of goods sold and what you are paying to operate your restaurant in terms of labor, including wait staff, bar staff, administrative staff and kitchen staff. The figure you use for labor costs should reflect wages, payroll taxes, and benefits, as well as any other employee-related expenses. Though each business is different, the rule of thumb for restaurants is that total labor costs should represent less than one-third of your total revenue. If it is more, you may want to evaluate how much you are spending in each of the labor areas and assess the real value. 
Food Costs – This is different from cost of goods sold, as it is reflected as a ratio that divides that number by what you are able to sell the prepared menu item for. To determine your total food costs, divide your cost of goods sold by your total revenue and then multiply by 100. 
Overhead – These are the rent, electricity, and other expenses that are fixed costs of running your business. You can add them up and break them down as narrowly or as broadly as you’d like, as some costs are billed monthly and others are daily. Knowing what you are on the line to pay regardless of how business is doing is essential. 
Gross Profit – When you have calculated all of your expenses and all of your sales, you can determine what your gross profit is by subtracting expenses from total sales.

There is no doubt that tracking the nitty-gritty of expenses and income is not the most fun part of owning a restaurant, but without doing so you are asking for financial trouble in the future. If you prefer to have somebody else take care of this aspect of your business, it will allow you to focus on the part of the industry that you love: the food, the service and the customers. For information on how our firm can help you with this, contact us today.

Owning your own small business is a dream that few are fortunate enough to realize, but even those new to the joys of entrepreneurial self-determination need to spend time thinking about how you’re going to eventually leave the business. No matter how far off it may seem, the best way to ensure that your time in your business ends up meeting your personal goals and expectations is to prepare an exit strategy now. Crafting an exit strategy long before you plan to leave may feel a bit like starting a meal with dessert, but there are plenty of benefits to doing so. It helps you understand all your options and what the potential outcomes of each may be. Let’s take a closer look. Why an Exit Strategy is Necessary for a Small Business Though you may think of an exit strategy as only suitable for big corporations or partnerships, every business should have one so that ownership can be transferred without being hampered by negotiations or stress. As with so many things in life, the more planning you do ahead of time, the less aggravation you are likely to encounter when the time comes. If you’re just starting to think about what your exit strategy should encompass, make sure that you think about the following:

What your expectations are of your business in the long term, what your financial needs are now, and what they are likely to be in the future 
How long you want to be involved with the business 
Who else has been involved in the business, what their needs will be, and how you will meet those needs

Those are the key issues that an exit strategy takes into consideration and keeping them in mind will help you to ensure that you’ve addressed everything that you need to in a strategic and organized way. Even if the particulars involving these individual elements change over time, having a rudimentary exit strategy already in place will make modifications easier. The Most Common Exit Strategies Used by Small Businesses There are several different ways to leave a small business, but the five shown below represent the most commonly used: Liquidation This is the straightforward process of selling a business’ assets. Liquidation can be done in two different ways.

Close and sell assets quickly – Business owners who do this often find themselves unable to leverage goodwill, client lists, and other non-tangible assets. They only monetize assets that they sell and end up losing value. Though this has the advantage of being a simple and quick process, it often leaves you with less then you could realize if you take your time, and only allows you to take advantage of tangible assets like equipment or inventory. It also leaves you in the position of having to pay off creditors immediately with the proceeds. 
Liquidating over an extended period – This option represents a move from reinvesting funds into the business to paying yourself with the business’ revenues. Small business owners who choose this “lifestyle business” option run their business until they are no longer earning money and able to maintain their lifestyle, and then close. Though many prefer this option, it has a deleterious impact on the business’ growth potential and your ability to consider selling it for a profit. It may work well for sole proprietors, but it is not a good option for businesses that have investors who want to earn a profit or get paid. Choosing this option also requires consultation with a tax professional. Small business owners considering liquidation need to consult with experts who can advise them on the right approach to asset sales, addressing liabilities, how to handle existing employees and more to ensure that all their commitments and obligations have been legally and responsibly addressed.

Selling the business to someone familiar such as a family member, friend, employee, or customer In most cases this involves a process formalized by a seller financing agreement that outlines a gradual purchase that provides income to the seller and avoids a large initial investment for the buyer. Many times, these agreements involve either formal or informal mentoring as the business transfers hands to allow a smooth transition. Though it may be tempting to arrange a sale to a friend informally, it is important that everything be done with the help of an attorney and accountant to ensure that valuation and other issues such as estate planning and family succession can be addressed if appropriate. There are many advantages and disadvantages to this type of arrangement. By having an exit strategy in place that makes current employees into eventual owners, you create more goodwill and loyalty and inspire greater productivity and creativity. It also allows you to continue being involved and ensures a smoother transition of business operations. However, this type of plan can also create jealousies and competition between family members or employees, and may lead to your undervaluing your own business as you attempt to help those you care about. Selling the business on the open market There are many entrepreneurs who are looking for established, successful small businesses to purchase, as it avoids much of the hard work and risk that is initially involved. Entrepreneurs will find it easier to secure financing for a business that has a known revenue stream, goodwill, cash flow, and systems in place. To make yourself as attractive as possible to this type of buyer long before putting your business on the market, make sure that all of your records and financial papers are in order, and check out helpful information like this from the Small Business Administration to make sure that you are leveraging all of the features that you have already worked so hard to establish. Selling your business on the open market is a great exit strategy for those whose businesses have a solid financial foundation and well-established clientele and reputation. However, the process can be drawn out and disappointing, especially if the offers you receive are lower than your valuation expectation. Selling to an industry insider Competitor businesses may believe that your small business is a good acquisition, whether to add to their portfolio or to eliminate competition. Similarly, employees in a related industry may be interested in ownership of a company that is already well established so that they can leverage their experience without having to start from scratch. This can be a particularly good option if you wish to remain in the business but in a consulting role with fewer responsibilities. However, many previous owners find themselves disappointed with their new role or the changes in the business’ culture or approach or the disposition of long-tenured employees. This type of scenario requires extensive involvement with an attorney to ensure that all aspects of the acquisition agreement are clear, and that the valuation is appropriate. Initial Public Offering (IPO) This approach involves selling shares of the company to the public to raise capital. Though the process takes time and is expensive, it goes a long way to earn a company public recognition and brand awareness and can be very profitable. Going public also involves a significant amount of documentation and regulatory compliance surrounding reporting and being open to the opinions and desires of shareholders in how the company is operated. Before you make any large decisions or moves regarding your business, be sure to consult with our office.