by eclewis | Jun 3, 2015 | Business News
Employee Due Diligence
The next part of our series on Due Diligence will discuss Employee Due Diligence.
Now if the business you are looking to buy does not have any employees then this may be a simple process, but it may not be as simple as you would think. For example, the business that you are looking to buy may not have any employees per se, but they may instead utilize independent contractors, which may in fact be more properly classified as employees. This could bring up some significant liability and operational concerns going forward, so you will want to have these relationships carefully scrutinized by yourself and a knowledgeable attorney. This way you will know what you are getting into with this business purchase.
Some of the documents you should be looking for are:
- Employment contracts
- Independent contractor agreements
- Non-Disclosure, Confidentiality, Intellectual Property and Non-Compete agreements
- Any employment or Human Resources policies or handbooks
- Documents showing any employee benefit plans such as (health insurance, retirement, bonuses, etc.)
All of these documents can bring up a variety of issues. You need to think about whether or not you want to continue using the same contractors and employees going forward. It may be a good idea for business continuity and transition, but it may also be a good time to make a change as well, especially if you have significant changes in mind or want to bring in key new staff of your own. The enforceability and terms of these agreements can have a substantial impact on the value and continuation of the business, and you need to be sure that you are getting a fair deal with the purchase.
Beyond the documents themselves, it may be a good idea to gauge employee feelings regarding an acquisition and possible change in management. If employees are not happy about such a large change, it could be a disaster in the making to take buy the business. Think carefully and don’t let the excitement of being an entrepreneur cloud your judgment. Trust experienced professional advisors to help you with deals of this significance.
If you need assistance with legal help and/or document drafting for your business sale, please contact the Law Office of E.C. Lewis, P.C., home of your Denver Business Attorney, Elizabeth Lewis, at 720-258-6647 or email her at elizabeth.lewis@eclewis.com.
by eclewis | May 27, 2015 | Business News
Legal Due Diligence
Continuing as part of our series on Due Diligence, we have already outlined Financial Due Diligence, and this time we will take a look at due diligence regarding issues that are more legal in nature.
As part of the due diligence process, it is important that you have the legal documents of the business reviewed, just like you would the business’ financial statements. This can help identify irregularities or potential problems with the acquisition. In addition to documents to review, it may also be a good idea to interview the owners and employees of the company to see if what happens in practice with the business lines up with its legal documentation.
Some of the documents to review include:
- Articles of Incorporation/Organization, Bylaws/Operating Agreement, or any other equivalent document (like a Partnership Agreement)
- Minutes of meetings as well as any stock or other buy-sell agreements between owners regarding their ownership interests
- Documents showing capitalization of the company (meaning who are the stock or ownership interest holders)
- Major contracts the company has with its suppliers, distributors, etc.
- This can also include employment contracts
- Insurance policies benefiting the company
- Any intellectual property rights, licenses, trade secret information etc.
- Documents relating to any lawsuits against the company
These documents will indicate how the company has been formed, as well as who all of the owners are, what types of restrictions have been placed on the company or its owners, and other key legal issues. This can help determine if there will be any complications regarding the transaction, as well as if the business has been run properly and in accordance with the legal documents. Additionally, having this type of documentation reviewed can help understand the business better, which can also help in determining a good valuation of the company. Finally, having these legal documents reviewed can also provide insight into existing or potential liabilities the business is exposed to, so you can understand what you are getting yourself into by purchasing the business.
If you need assistance with legal help and/or document drafting for your business sale, please contact the Law Office of E.C. Lewis, P.C., home of your Denver Business Attorney, Elizabeth Lewis, at 720-258-6647 or email her at elizabeth.lewis@eclewis.com.
by eclewis | May 20, 2015 | Business News
Financial Due Diligence
Whenever you are thinking about buying a business (or selling a business) it is expected that you will perform your due diligence before the sale is final to help decide whether or not the purchase is a good idea by verifying the material facts related to the transaction. This post discussing financial due diligence will be the first in a series discussing the different aspects of due diligence that should be performed prior to finalizing a transaction.
The idea behind financial due diligence is to help determine the value of the company you are buying by reviewing their financial documents. These financial documents should be audited independently to determine their accuracy.
- Financial statements for the past few years
- Income statements for the past few years
- Tax returns for the past few years
- Balance Sheets for the past few years
- Description and valuation of significant assets (including real estate and accompanying title and tax information, as well as information of depreciation schedule)
- Any current budgets, revenue projections, or other similar documents
- Any loan or other promissory note documentation (as well as any security interests against the business or its assets)
You want to be sure that nothing in these documents is questionable or raises any concerns about the current and future value of the company or assets that you are purchasing. You want to be sure that you have all the right information so that you can negotiate in a fair and informed way. If the other party is unable to produce these documents, that may raise a red flag as well, and you will want to be sure that you raise these issues with your professional advisors (attorney, accountant, etc.) to determine what the next course of action should be.
Big purchases can be very emotional, whether it is buying a home or a car, it can be easy to get emotionally attached to the prospective purchase. However, you don’t want to let yourself get so caught up in the emotional excitement of taking over a business that you lose site that this is a business transaction. You need to independently verify that everything is what the current owners say it is with regard to the business you are thinking about buying.
If you need assistance with legal help and/or document drafting for your business sale, please contact the Law Office of E.C. Lewis, P.C., home of your Denver Business Attorney, Elizabeth Lewis, at 720-258-6647 or email her at elizabeth.lewis@eclewis.com.
by eclewis | Apr 8, 2015 | Business News
Colorado Ranks Third Among U.S. State Economies
Colorado was recently ranked 3rd among US state economies by Business Insider. You can see the full report here. This is not too surprising since Business Insider also ranked CO as being the fastest growing state economy last year. A large part of the methodology of the new ranking, Business Insider was looking at factors such as GDP per capita, unemployment rate, weekly wages, and state government budget situation.
Naturally, all of these individual factors are significantly affected by the state of the energy market, especially for states like Colorado with significant oil and gas exploration and development. It’s interesting to note that North Dakota came in at #1 on this list and Texas at #2, two states that also have substantial energy-based economies. With the recent drop in oil prices and reduction in related jobs, it will be interesting to see how this impacts Colorado’s economy. We already discussed in a previous post about how the lower gas prices have increased hiring and business overall in other sectors of the economy.
So far, it has been reported that Colorado has not been significantly impacted by the drop in oil prices yet, at least as far as the recent data is able to show. However, this will not likely remain the case. It was reported that half of Colorado’s drilling rigs have not been in operation for months. Growth and other economic projections for the state’s future are not as bright as they once were. This is expected to increase unemployment, reduce GDP, and also reduce state tax revenues too.
Colorado does have a diversified economy, certainly much more so than say, North Dakota, and the state is expected to weather the storm in the energy market better than other areas, with continued growth and low unemployment rates continuing, just perhaps not quite as strong, into the future. After all, business confidence here in Colorado is still continuing to rise. Colorado is and will continue to be a top state for businesses both big and small.
If you have questions about legal matters for your business, don’t hesitate to reach out to the Law Office of E.C. Lewis, PC, home of your Denver Business Attorney, Elizabeth Lewis, at 720-258-6647 or email her at elizabeth.lewis@eclewis.com.
by eclewis | Apr 1, 2015 | Business News
Full-Strength Beer & Liquor in Grocery Stores
Recently, there has been a greater push to allow grocery stores and other chains like Target to be able to sell liquor, wine, and full-strength beer at all of their locations. Currently, Colorado law only permits one liquor license per business for the entire state, which means that only one location of a chain of stores is able to sell liquor, wine, and full-strength beer. Other locations are limited to only being able to sell 3.2% beer and wine coolers. Now, supporters of this change are working to get the necessary signatures to take the measure to voters directly, rather than rely on the legislature to make the changes.
The possibility of change brings up opposing concerns from different groups around Colorado. Primarily, large supermarkets and other grocery chains would like to be able to provide their customers with a one-stop-shopping experience at all of their locations, to make shopping for groceries and alcohol more convenient for shoppers. However, due to the current laws, there are currently hundreds of locally owned and operated liquor stores peppered throughout the state to meet consumers’ demand. These small business owners are facing a potentially huge loss of business if these changes take place. They are worried that they will have to cut employees and potentially shut down altogether if they are competing with bigger grocers.
With Colorado being a hub for craft beer brewers, this too could present a difficult issue for them as well. Craft brewers may find it more difficult to get their products on the shelves of larger retailers and with potentially fewer, smaller liquor stores, which could hurt their businesses as well. At the same time, smaller liquor stores might be able to try leveraging their craft beer selection and expertise to keep consumers coming to them for their beer needs, instead of picking up something at the bigger grocery stores.
Some say that it is the local nature of liquor stores and breweries, which were influenced at least in part by the current laws, that encouraged Colorado’s independent craft beer culture. They don’t want to see that culture change and want to keep the jobs and revenue here in Colorado and going to Colorado businesses, instead of larger regional and national chains.
Either way, it will be interesting to see how this issue continues to develop.
If you have questions about legal matters for your business, don’t hesitate to reach out to the Law Office of E.C. Lewis, PC, home of your Denver Business Attorney, Elizabeth Lewis, at 720-258-6647 or email her at elizabeth.lewis@eclewis.com.
by eclewis | Mar 25, 2015 | Business News
Appreciating your Customers and Clients
It cannot be put any more simply than to say that without your customers and/or clients, your business could not survive, so lets talk about ways that you can show your appreciation to them and increase their loyalty to keep them coming back again and again.
You can always consider sending out a handwritten thank you to your top clients to let them know how much you appreciate their business and that you are here for them if they need anything else. You may also think about hosting a client appreciation day of some kind where you offer to take them out to lunch or send out small gifts to them. Sometimes simply reaching out to them for a less formal check-up may be appreciated as a way of showing that you care about how they are doing personally and professionally.
If your business is “customer” rather than “client” based, consider issuing some coupons available for customers to get a discount when they come back next time. Not only are these incentives a relatively small effort on your part but also they can go a long way in forging long-lasting relationships. Such incentive programs do not have to be a drain on your business either; in fact, they can be a large source of long-term growth through customer loyalty and repeat business.
Speaking of customer loyalty, if you are ready to make a bigger step than offering one-time discounts, it may be time to consider developing a customer loyalty program. This could include offering discounts or free products after satisfying a particular number of purchases in a period of time or after meeting a certain dollar amount of purchases. These kinds of programs can be implemented with a variety of smartphone applications available for small businesses, so you do not have to develop one by yourself. This can be a great way to not only increase the quantity of your sales but it can also increase the quality of the overall experience for your customers. This will likely not only increase their customer loyalty, but it will also increase the likelihood that they will bring in their friends and family, write positive reviews online about your business, and tell others about your business.
Whatever you decide to do for your clients or customers, think about it from their perspective. If you were a client or customer, what would you appreciate and what would make you want to come back to that business or refer it to your friends and family? These ideas do not have to be expensive or complicated, but instead, they simply demonstrate how sincerely you value your patrons and want to keep them coming back.
If you need legal assistance for your small business, or if you are ready to start your own, do not hesitate to reach out to the Law Office of E.C. Lewis, PC, home of your Denver Business Attorney, Elizabeth Lewis, at 720-258-6647 or email her at elizabeth.lewis@eclewis.com.
