Where to Sell Your Store, Contesting Negative JBT Feedback and More of Your Questions for February

I’d always planned to put my store on the market to fund my retirement, but a jeweler friend said I’d be smarter to sell it to my manager or another insider. What do you think?

Your friend may well be right. The market for small businesses is fragmented and illiquid, which means it’s unlikely you’ll have investors just waiting with the cash when you’re ready to sell. “Buyers are more likely to offer to pay over time from the company’s future earnings, which leaves the retired CEO with no control over the business and utterly reliant on the new owners to maintain its profitability,” says Jim Kohles, a CPA in Walnut Creek, CA, who specializes in retirement planning. Kohles says a good alternative is to establish an S corporation combined with an employee stock ownership plan (ESOP). “You’re selling the company to the employees while retaining control until you phase yourself completely out,” he says. “The ESOP doesn’t pay income taxes — the employees do when they retire. And you don’t pay taxes on the money or the stock that you contribute,” he says.

David Brown of the Edge Retail Academy agrees this is a good option and notes that you will often get a better price for the goodwill in the business when you sell internally. But he adds you should be careful not to become so focused on the technical components of a sale such as tax minimization that you lose sight of the bigger goal: ensuring you have a solidly profitable business to sell.

“My overall preference is to help retailers add value to their business while at the same time generating a largely ‘passive’ income for themselves,” he says. “Ironically, the more successful they become at doing this, the less attractive it is to sell it.

CREDIT RATINGS

We are experiencing some negative feedback on our JBT rating. When we call the JBT to ask about it, they are unwilling to release any information to us concerning who is reporting. Isn’t that unfair?

While it may feel one-sided, the confidentiality granted to vendors does keep the system going and ultimately lowers risk in the industry. Unlike consumer reporting agencies, which are required by law to provide you with a fairly detailed accounting of your credit status, business credit bureaus do not have to disclose the identities of the creditors supplying the information. The reason is that without such anonymity, says Dione Kenyon, CEO of the JBT, suppliers would be less willing to provide updates on how punctual their clients are about paying their bills.

Kenyon says that if a retailer believes there is an error in their report, the JBT will promptly recheck the data with at least five vendors (five is the minimum to support a payment rating; for some retailers there could be 20 or more), discuss the results with the retailer, and revise the rating if warranted. “We work hard to get it right,” she says, adding, however, that “in most cases, the retailer really is slow in paying.”

Kenyon added the most common cause for credit disputes is miscommunication — often between the store owner and the original sales rep — over the repayment terms. Retailers can help themselves, she said, by voluntarily providing the JBT with as many supplier names as possible so that it can base its rating on “the broadest and most representative data available.”

A weak credit rating can be improved over some months’ time unless there are significant collections claims on file with the JBT, in which case the process could take a year or longer. “Bottom line, we are available to discuss this individually with each company depending on their circumstances,” Kenyon said.

BREACH OF TRUST

We gave a dealer a gold item on memo … and he disappeared. My insurer says that because I willingly gave the item to him, he had not “robbed” me, and as such, I cafile a claim. Do I have grounds to challenge the insurer or will I have to pursue this case myself?

Jo-Ann Sperano, a mediation specialist at the Jewelers Vigilance Committee, has — sadly — no words of encouragement for you. “The insurance company is 100 percent correct,” she says adding that even the second option puts you in a tough spot. “This would be costly to litigate since the investigators would have to locate the gold buyer to serve papers.”

LIGHTING

I bought natural daylight LEDs and they give off a blue color. Why is that?

When the term “natural daylight” is used in the sphere of lighting it refers to the Kelvin temperature of sunlight. Natural daylight is in the 5,500-6,500 Kelvin range, which is a blue-toned light, explains Howard Gurock, president of LED maker Econo-Lite. “In the real world, we don’t walk around with blue complexions because the sun has every spectrum of light. But a light in this range is considered to be natural daylight, hence the blue tones.”