Q&A With Steve Michaels

Mr. Michaels owned his own telephone answering service in Palo Alto, California and was the founder and publisher of the Connections Magazine. He has personally published over 200 TAS related articles including a monthly segment called “Mind Your Business” which was featured in Connections Magazine. He also e-mails a highly regarded newsletter called “TAS Tips” to over 1500 businesses. Steve has been a speaker for this industry and has worked for 4 major TAS/Voice mail companies including a manufacturing company, which he helped to take public.




Successfully Purchasing Accounts

Question: I am in charge of account acquisition, but every time I try to buy some accounts, someone beats me to it. What am I doing wrong? Answer: In today’s challenging economy, everybody wants to increase profitability. Purchasing accounts is one of the best ways to do that. But in this market, you need to be ready […]Read More

The Due Diligence Process

Question: I’m selling my business, and the buyer has asked me for a long list of information. What am I supposed to give him to complete his due diligence? Answer: Everyone has his or her list of due diligence questions. One buyer might only want three or four items answered before he makes his decision, while others […]Read More

Escrow Deposits and the Asset Purchase Agreement

Question: I am buying a business. In the letter of intent (LOI), the seller and I have agreed on a due diligence date with an escrow deposit. To what extent is my escrow at risk, and where does the asset purchase agreement fit in? Answer: There are a couple of considerations, depending on whether the escrow deposit […]Read More

Is There a Set Formula for Purchasing a Business?

Question: “I have self-listed to sell my business, and a prospective buyer has come to the table with an offer, stating that the following is a standard formula for purchasing a business. In your estimation, is this correct? A confidentiality agreement is signed. This agreement also stipulates that the business be taken off the market for […]Read More

How to Determine the Right Buyer for Your Business

Q: I am trying to sell my business myself and have two offers. I really like one gentleman, but another has put in a higher-priced offer. Do I go with my gut and accept the lower offer, or should I go with the higher offer since selling a business is all about money? A: Entertaining offers is […]Read More

The Importance of Confidentiality

Q: Is it wise to tell my employees of the impending sale of my business? A: The short answer is no! If you are selling your entire business and if your employees will have a job with the new owner, then go ahead and tell them. However, if you are selling accounts only or if your employees […]Read More

What Is a UCC-1 and Why Should I File One?

Q. I sold my telemessaging service and hold a promissory note from the buyer. Should I also file a UCC-1 form? A. UCC-1 stands for Uniform Commercial Code financing statement. In general, it is a public notification that the sale of your accounts (and equipment, if included) have not been completely paid for. It is filed with […]Read More

The Employee Non-Compete

Q: “If an employee signs a non-compete agreement and the company is purchased, is this agreement passed on to the new owner?” A: The answer would really depend upon how the business was sold. If the business was sold as an asset purchase/sale (which is typical), the agreement would not automatically be assignable to the purchaser, even […]Read More

When to Walk Away

Q: I’m trying to purchase a business, but the seller keeps asking for more. When do I say, “Enough is enough”? A: Once, my wife and I were trying to purchase a house in Northern California. We made a full-price offer directly with the seller who hemmed and hawed for several weeks. He then asked that we […]Read More

The Value of Representation

Q: My wife and I are considering selling our call center. I feel that I am capable of selling the business myself, while my wife feels we should get an intermediary or broker. What are your thoughts on this subject? A: Let me answer your question by telling you a personal story. We recently built a small […]Read More

Asset Sale or Stock Sale

Question: What’s the difference between an asset sale and a stock sale? Why does it matter? Answer: An asset sale is the purchase of the assets of a business, which normally consists of the client list, equipment, furniture, fixtures, rights, good will, and a covenant not to compete. It does not include cash, and the buyer does not assume the liabilities. When a […]Read More

The Sliding Scale of Power Strategy

Question: I am thinking of selling my teleservice company myself, but I’ve heard horror stories about being taken advantage of. How can I protect myself? Answer: Unfortunately, some unscrupulous buyers will do or tell you anything to purchase your business. Once you have signed a letter of intent and received a deposit, your business is off the […]Read More

Who Holds the Funds?

Question:  In selling part of my business, I accepted a clause that allowed the buyer to hold back $10,000 from the total purchase price with his attorney to verify my accounts. The holdback period is for sixty days after closing. It is now past the sixty-day period, and I still don’t have my money. The buyer […]Read More

The Difference of One

Q. I have been trying to acquire some call center accounts and have been told that I should not offer anything over ten times monthly billing, but I keep losing out. Can you help me? A. I don’t know why someone would tell you this; sales of telemessaging call centers are just like any other market – […]Read More

Mind Your Business

Q: I am in the process of purchasing some teleservice accounts billed on a twenty-eight-day billing schedule. The seller wants to go back thirteen billing cycles, or one year, to average out the monthly billing, but I only want to go back four months since he has lost some accounts and the monthly average will be […]Read More

The Value of an Employee Non-Disclosure

Q. I am selling my business and have been asked by the buyer if my employees have a nondisclosure on file. What is the purpose of this, and is it enforceable? A. This is a tough one. Some employers feel that a nondisclosure is not worth the paper it is written on, while some buyers will not […]Read More

Dealing with Large Accounts During an Acquisition

Q. I am purchasing a telemessaging service for ten times the monthly billing amount. It is a good solid business, but they have one client that represents 27 percent of their revenue. What can I do to protect myself should that account leave after the acquisition? A. This is a good question, and surprisingly it comes up […]Read More

Asset Allocations

Question: While purchasing a telemessaging company, the seller’s attorney asked me to complete the allocation of the purchase price section in the purchase agreement. What is this, and why is it necessary? Answer: Purchase price allocation is different from receiving the actual funds from the sale of a business. Allocation means, “to set apart for a specific […]Read More

Buying Past Due Accounts

Question:  I am in the process of purchasing an answering service that has some ninety-day past-due accounts. The seller feels that these accounts have the same value as the current accounts. What is your feeling about purchasing past-due accounts? Answer:  The value of an account decreases the longer it is past due. The main reason is that […]Read More

Retention Clauses

Question:  I am in the process of purchasing an answering service and want to put a retention clause in place. How does a retention clause work? Answer:  A retention clause states that an account has to be on service with the buyer for a certain amount of time and have made their payments in order to be […]Read More

Grow Your Call Center

Q: How can I grow my call center service? A: That’s a great question, one that I am often asked. Here is what I recently shared with a caller: First, sign up with an email blast service. For content, target your clients who are thriving during this recession. If you can’t do that, then find […]Read More

Why Should I Pay a Broker?

Q. I want to sell my business myself. Why should I pay a broker? A. The old adage from Abe Lincoln states: “A man who represents himself has a fool for a client.” This is also true for anyone who represents him or herself while trying to sell his or her business. A more mature and experienced […]Read More

Satisfaction of Due Diligence

Q. I am selling my accounts only, and I am having a problem with the buyer. I would like to close the deal and then hand over my account list to the buyer. But he wants a copy of my customer list before closing so he can input the data into his system. Is there a […]Read More

The High and Low Road of VoIP

Q. I have thought about using VoIP (Voice over Internet Protocol) to save on my phone bills, but I’ve gotten different answers from different sources regarding the quality and reliability of VoIP. Is there a formula for its success? A. There is no “formula” for success with VoIP, but there are various methods of deploying VoIP successfully […]Read More

Providing Disaster Relief

Q. We generate a lot of extra revenue whenever there is a hurricane, power outage, or snowstorm. Is there any way that we can capitalize on all the work we do for these clients during natural disasters? A. That’s a great question and I have a great answer from Wil Porter from Ansaphone Service in Massachusetts: The […]Read More

The Asterisk Alternative

Q. I have older call center equipment and need to upgrade. I have heard about a new telephony platform/switch called Asterisk. What is it, and can I use it for my telemessaging call center? A. Asterisk is an open source software telephony engine and is available for download free of charge. It seems to be the buzzword in […]Read More

Selling Your Receivables

Q. I am in the process of selling my call center. The buyer would like my receivables. What are they, and why should I give him something that I have worked for? A. This is a good question. First, receivable are the monies owed by the clients of a call center to the owner – that is, […]Read More

Responding to Falling Call Volume

Q. Over the past few months, my call volume has dropped due to the economy. Is there anything I can do? A. You could think of your business like a well-run assembly line. When times are good, you need more workers to assemble the parts as they go down the line. You need technicians to maintain […]Read More

The Distressed Sale

Q. I recently picked up some accounts from a competitor who just shut his doors and walked away. I know he had many more accounts. Even in a distressed sale, don’t these accounts have any value? A. Absolutely. It continues to flabbergast me that this continues to happen. Yet we all have different stress levels resulting […]Read More

Staffing Issues During an Acquisition

Q. I am purchasing an answering service and would like to interview and possibly hire some of the existing employees. The seller does not want me to talk to them until after the close of the sale. Can you give me a good reason why? A. The quick answer is that the seller is fearful […]Read More

Keeping Your Business Healthy

Q. I am starting to lose customers due to the current economic conditions. What should I do to keep my business? A. The first thing I would do is to look for ways to cut costs. Your output cash flow should always be less then your input cash flow. Your major expenses are rent, equipment […]Read More

Planning for Retirement

Q. I am a baby boomer, and the retirement years are looming large. I have one to two years before I want to retire. Do you have any suggestions for an exit strategy? A. Begin by finding out what your business is worth from a reliable source. Next, look at what you can do to […]Read More

Retaining Staff During an Acquisition

Q. I am purchasing a telemessaging call center and will be retaining the existing staff. Since the purchase has not yet closed, what should I be aware of in terms of my obligations and the seller’s obligations regarding the employees? A. If you will be retaining the staff, one of the most important things needed […]Read More

Charging a Holiday Fee

This month’s question was taken from the ATSI listserv. The answer was written by Paula Ford from Answer Center, Virginia Beach, Virginia.  I often receive the same question but have not found a better response than Paula’s. Q. For those who charge a “holiday fee” to their clients, what feedback do you have? A. Profit is not […]Read More

Starting An Answering Service

Q. I am thinking about starting an answering service. Do I need a business plan? A. Some entrepreneurs spend too long polishing overly long business plans (fifty to a hundred pages or more) when they should be completing a market survey instead. It doesn’t take a year of planning to figure out whether someone wants your […]Read More

Retaining Clients

Q. I am losing clients to my competitor. What can I do to keep and expand my existing customer base? A. I received a call last month from a lady who responded to my website regarding VoIP. She wanted to know how she could incorporate VoIP into her telemessaging call center. Since her equipment was […]Read More

The Power of Thank You!

I have not received any questions for this issue so I will inject an old idea that has lots of significance and value. I was chatting with a good friend over the Thanksgiving holiday weekend, and the subject of gift giving for their grandchildren came up. I asked what their ritual was, and she said […]Read More

The First Time Buyer

Question:  I am considering purchasing an answering service. I am a first time buyer, and I am aware of the importance of performing due diligence on the business prior to the purchase. What else should I do? Answer:  In performing due diligence, don’t forget to include a lien search. A lien is a legal right […]Read More

The Value of EBITA

Q.    I have been under the impression that telemessaging services are always sold by using a multiple of monthly revenue. A buyer from outside the industry has recently approached me to purchase my business, but they want to offer me a multiple of EBITDA for my business. What does this mean, and how do I figure […]Read More

Adjusting the Sales Price

Q. We have signed a Letter of Intent and have agreed upon a closing date for the sale of a telemessaging call center.  The seller asked me, “If I sign up another few accounts before the actual closing date, then what happens?  Do I get more money for my business?” A. In the teleservice industry, there is […]Read More

Selling A Commingled Business

Q.    I have put an offer in to purchase a telemessaging service. The problem is that the owner also has paging and alarm monitoring in the same location, and everything is commingled and run as one company. The owner is having trouble breaking out the specific financial information that relates to the telemessaging service. How can […]Read More

Performing Due Diligence

Question: Mr. Michaels, I own a small telemessaging service, and I have been approached by a large conglomerate wanting to purchase my accounts only. The following is a list of information they require before putting in an offer or (LOI) Letter of Intent. A brief description of my business model A copy of all contracts signed […]Read More

Ensuring a Smooth Sales Process

Question: I am thinking of selling my telemessaging call center. In addition to having my financials updated and my paperwork in order, what else could slow down the process? Answer: The time between listing your business and accepting an offer can be anywhere from one to several months depending upon the size of the business, the selling […]Read More

The Percent of Revenues Method

Question:  I have been approached by a larger competitor wanting to purchase my business. They offered me a nominal amount down with a percentage of the revenues over a specific time. Is this a good deal? Answer:  It’s a good deal for the buyer.  The buyer will probably tell you that they will increase the […]Read More

Valuation Methods

Question:  How can I determine what my telemessaging business is worth? Answer:  There are four basic ways to valuate a business: 1) a multiple of revenue; 2) a multiple of EBITDA; 3) Price to Earnings (PE) ratio (used for publicly held companies); and 4) free cash flow model. In the telemessaging industry, the first two […]Read More

Selling For Cash

Question:  I have been told that most tele-messaging services are currently receiving cash for the sale of their business. Is there ever a time when a seller wouldn’t want cash? Answer:  Yes. If you’re selling a C Corporation, odds are you’ll be selling stocks, not assets. If you were to sell the corporation’s assets, the […]Read More