Buying A Business? Why You Should Stick With One Broker

We’ll start this one by saying as a caveat that if you end up with a dreadful broker who never returns your phone calls, doesn’t show up to scheduled meetings on a regular basis and is all around just bad – by all means, find a new broker.



Caveat aside, many business buyers come to the business-for-sale marketplace and try to play the field, and this never ends up working in their favor.



What do we mean by playing the field? If you’ve emailed 30 brokers in a small local area to request information on potential businesses, then you are doing yourself and your prospects for business ownership a big disservice.



Why?



Your business search needs to be focused in order to be successful, and in order to have a focused business search you need to have a relationship with a good broker. This relationship should start with a conversation about several very important things – things that won’t come across if all you are doing is shooting email requests to everyone in the area.



Your initial conversation with a broker might start out as an inquiry into one specific business, but it shouldn’t stay that way for long. A good broker is going to ask you questions that will let them know your direction in your search and help them narrow your focus to just those businesses that would fit with your goals.



What should a broker be asking you?



They should ask you about what your goals for business ownership are. If what you are hoping to achieve is a very flexible schedule so you can spend more time with your kids, then some businesses are definitely out of the question. If schedule isn’t a priority, but making as much money as possible is – then a very different business would be for you.



They should be asking you about what your passions are. Entrepreneurship is no picnic. It can be an enormous amount of work, so you need to be doing something that you can be driven and passionate about or you will end up miserable.



They should ask you about your experience. If you’ve never worked so much as a single shift in the restaurant industry, then it would be a terrible idea to buy a bar or restaurant. Business ownership is tough, especially if you are brand new to entrepreneurship. You don’t want to add learning an entirely new industry on top of it – you will be setting yourself up for failure.



They should be asking you about your finances. You might think you have enough money to buy a particular business, but the reality of buying is that you need far more money than just enough to cover the listing price. You need enough to write the closing check, enough for the deposits for your utilities and lease, enough to buy new inventory, enough for licensing fees, enough for the first few rounds of payroll – the list goes on. A good broker doesn’t want to set you up for failure, so knowing your financial situation will allow them to find you businesses you can actually afford.



The point here is only by having a relationship with a single broker (who knows these very key things about you and about your business ownership goals) can you have any hope of finding the right business.



Approach you search for businesses by searching for a good broker first – then you can count on that relationship to bring you the businesses you should see.



Have you sent a ton of email requests but haven’t actually had a conversation with a broker yet? Do you want to know more about why a relationship with a good broker is so important for your success in purchasing a business? Ask us! Please feel free to leave any questions or comments, and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

www.InfinityBusinessBrokers.com

 

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Buying Or Selling A Business? Don’t Underestimate Training

Have you thought about what happens after the keys change hands and the buyer and seller walk away from the closing table?

 

The transaction process isn’t over yet – now the training period begins.

 

When a business is sold, part of the purchase contract will typically cover a training period of some sort where the seller will stay on with the business until the buyer can be sufficiently trained to take over the helm. This is an all-to-important part of the business transaction process, so it is in everyone’s best interest to keep the training period productive and amicable.

 

The best way to start the training period off right is to keep the negotiations during the sale process as friendly as possible. Both parties can do this by always using the business brokers involved as intermediaries. It might seem inefficient to always send questions or comments through a third party, but what starts as an innocent phone call to the other side can quickly devolve into a deal-killing fight. Keeping things friendly for the time period before your are stuck working together will make the start of training much easier.

 

If you are the buyer in the situation, it may be tempting to walk in on day one and completely change everything to your liking. This is a huge mistake for two reasons.

 

One, you shouldn’t make any changes to a functioning and profitable business until you know everything there is to know about the business. Then, and only then, will you know what parts of the business are making it profitable and successful and what aspects can be changed without causing any unforeseen damage down the line.

 

The second reason your should hold off on any changes is for the seller’s sake. The seller has a wealth of practical knowledge about the business you just bought, and it is absolutely in your best interest to get absolutely all of that knowledge before the training period is over. By coming in and changing everything, you are essentially telling the seller you don’t think anything they’ve done is worth learning about – a move so insulting that you will probably have an incredibly hard time getting any of that precious practical knowledge. Try to remember that this business was a huge part of the seller’s life, so treat them with a bit of compassion and wait until they are officially gone before you implement any big changes.

 

If you are the seller in the transaction, the training period can be difficult for a number of reasons. First, once you’ve left the closing table and the keys have changed hands, it can be very tempting to mentally check-out. This is a very bad idea, especially if your deal has seller financing involved (which many deals do). If you check-out and can’t properly train the new owner, the their chances of success (and you seeing the rest of your money) are probably not very good.

 

Another training pitfall for sellers is getting offended when the new owner wants to make changes. It can be extremely difficult to keep your emotions in check, but you must remember that this business no longer belongs to you, so the new owner can do what they please. Do your best to complete the training period amicably so that your business can carry on successfully without you.

 

Whether you are the buyer or the seller, it is critically important for the survival of the business in the long term that the training period happensso do your best to work together.

 

Have you bought a business and the training period wasn’t what it needed to be for you to successfully take over? Are you selling your business and you have questions about what the typical training period will be like? Please feel free to share your experiences or leave us questions here.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

www.InfinityBusinessBrokers.com

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Buying A Business? How To Handle Questions About Your Money

Talking personal finances with anyone, let alone someone you don’t know very well can be an intensely uncomfortable experience.

 

Conversations about how much money you have, how much money you make, what you can and can’t afford – these are typically considered off limits and rude in normal day to day interaction.

 

When you enter the business marketplace with the intent of buying a business, you will be confronted with these seemingly intrusive questions basically from the start, and that can make the process of finding a business somewhat uncomfortable if you aren’t ready to talk money.

 

Who’s asking about my money?

 

The first person who will be asking about your financial situation is your own business broker – but you will also likely have to disclose financial statements to sellers, their brokers and the property manager or landlord of the business location.

 

Why do I need to be ready to talk money? Why can’t I just look at businesses I know I can afford?

 

While you might feel that it isn’t anyone’s business how much money you have for the purchase of a business, it is critically important that your own broker in particular knows how much you are working with. One of the major mistakes that buyers make is misjudging how much capital they will actually need to buy, and then run, a business. For example, if you have $100,000 available to buy a business, you probably shouldn’t be looking at businesses that are listed in the $150,000’s with the hopes of negotiating down. You need to remember that in addition to the purchase price, you will need to have funds available for licensing and permitting, for purchasing additional inventory, for securing the commercial lease and for keeping yourself afloat long enough to get the business turning a profit with you at the helm. If you use every last cent of your available cash to write the check at closing, then you have set yourself up for immediate failure.

 

What should I do instead?

 

Be very open and honest with your business broker from the start, and then listen to their advice about what businesses you can and can’t afford. A good broker doesn’t want to see you fail because the success of the small business community is a broker’s bread and butter. Don’t be offended when your broker says “you can’t afford that”, as they are trying to keep you from sinking yourself from the start.

 

What about a deal with seller financing? Doesn’t that mean I can buy any business?

 

Definitely not. Many buyers come to the market expecting to put very little money down and have a seller finance the rest – but that isn’t how seller financing actually works. You typically need to put at least 50% down – if not more – for a seller to take your offer seriously. If seller financing is involved, a seller is also going to want to see that you have the right amount of cash to keep the business running and profitable long enough for you to pay them back, so you will need to reserve some of your capital for simply running the business.

 

Why does the landlord need to see financial information? The money the business makes is what will pay the rent, right?

 

Landlords and property managers want to see that you have the money to pay the rent, even if the business isn’t doing well. From the landlord’s perspective, they already have a lease with the current owners that guarantees them full payment of the remainder of the lease, so if you come to the table with anything less – they have no motivation whatsoever to approve you to rent the space.

 

The message here is if you really want to buy a business, you will have to get used to the idea that people are going to want to know how much money you are working with, and then they will want to see proof of that number. You will also need to get used to the idea that there will be some businesses that are simply out of your range, and that the person you have hired to help you through the business buying process (your broker) will need to be able to be honest with you about what those businesses are – without you getting offended.

 

Have you looked at businesses but can’t figure out how much capital you would need? Do you have more questions about what kinds of financial information you would need to disclose? Ask us! Please leave a comment or question here, and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

www.InfinityBusinessBrokers.com

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A Lesson From Shark Tank: You’d Better Know Your Numbers

If you’ve seen the show Shark Tank, then you know the typical drill. An entrepreneur knows their concept inside and out, but can’t get an investment from the Sharks because they can’t answer basic financial questions. Guess what? This happens in the small business market too.

 

If you take a step out of your business seller’s mindset and take a look at what buyers see in the market, you might be shocked.

 

Most listings for businesses for sale contain sketchy financial information at best, and if they contain any semblance of numbers at all they typically don’t make sense and don’t jive with the price the sellers are asking.

 

 

Where do these discrepancies come from?



While in a few cases the discrepancies come from good old fashioned dishonesty, for the most part the lack of consensus in numbers occurs because the seller simply doesn’t know. Small business owners are great at what they do, but in some cases they are not great at accounting or organizing their financial information.



We come across business owners more often than we should who can’t answer questions like “which product or service is the most profitable?” or “what is the cost to acquire a new client?”. If you are considering selling at any time in the near future, then you need to make the effort to get a handle on your financials long before you are being asked to justify a price.



What things should I be looking at?



Profitability of Products or Services



Many business owners who haven’t broken down the numbers may just assume that the most expensive item or service that they offer is the most profitable – but this is probably not the case. By tracking your products and services individually and then comparing them to the breakdown of what it costs you to provide that product or service, you may discover that your bread and butter comes from a low price item or service that you sell more than anything else. If not just for selling your business, this breakdown will also be immensely helpful when deciding where to put your marketing efforts.



Expenses



Small business owners are famous for paying for expenses out of pocket and never writing it down, or for jamming receipts for expenses in a box under the desk and never looking at them again. When selling your business, you may even think that disguising some of your expenses will make the business look more appealing and more profitable to buyers. This isn’t the case. First of all, there are a few expenses that will get added back before you set a listing price. Second, a business with very low expenses will look suspect to a discerning buyer. Really nailing down your expenses will not only help with selling your business, it will likely allow you to see where your money is going and give you an opportunity to streamline those expenses.





Don’t be a Shark Tank cautionary tale. If you are looking to sell, you need to get your financial ducks in a row, if not for buyers but for your own use to strengthen your numbers, focus your marketing efforts and streamline your expenses. Having a good handle on where your business is and where it needs to be will be instrumental in the negotiation process of your business sale. Strong and organized documentation of all of your financial information will also be very helpful in attracting buyers who are accustomed to the sketchy financials that are typical in the business scene.

 

Are you thinking about selling but are guilty of shoving receipts in a box? Do you have absolutely no clue what it costs you to aquire a new client and want help getting your ducks in a row before listing your business? Please feel free to leave questions or comments here!

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

 

 

 

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Soul Searching And The Right Help – The Best Way To Find The Perfect Business For You

Ready to become an entrepreneur and work for yourself?

 

How do you start the process of buying a business and decide what business would be right for you?

 



First, let’s look at how you SHOULDN’T start.



The majority of would-be entrepreneurs start their business search by perusing various online business listing sites for that dream businesses they’ve always seen themselves owning. While it may seem counter-intuitive at first, this is absolutely the wrong way to start.



How SHOULD you start?



Do some soul searching and talk to the people who care about you first.  Trust us when we say that owning your own business is a life-encompassing affair. Those dream-state visions of running a business from the beach with a cold drink in your hand are extremely far-fetched. When you work for yourself, you work all the time. Nights, weekends, early mornings, few if any vacations – and you need to be ready to make that kind of commitment. If you think that type of life is the one for you because it allows you to fulfill your own destiny and make all of your blood, sweat and tears work for you instead of for someone else, that’s great. Now you need to clear this semi-extreme lifestyle with your spouse, your kids – anyone who you have a commitment with. If you are becoming a one-man shop and you used to work 9 to 5, it can be hard to balance your longer hours with your loved ones – especially if they are used to having you home for dinner and used to having you coach their little league team every spring.



Once you have the support of those you are closest to, you need to figure out what your goals for entrepreneurship are. Do you just want to make as much money as possible? Do you want to work in a specific industry that’s always been your dream and passion? Do you want a flexible schedule? Do you want to be home for dinner every night? Is it important to have weekends off? What financial goals do you have to meet in order to support yourself and your family? These questions will be pivotal in choosing what business will be right, both for your entrepreneurial goals and for your life.



Now that you have these basic questions answered, you need to get some professional help. Find and talk to a good business broker. A good broker will immediately ask you many of the same questions we just outlined above, and then they will use that information to help guide you to businesses that will meet those goals. Notice that we didn’t say a good broker will just ask you what type of business you are interested in and show you only that. As brokers who care about the success of our clients, it is in our best interest (and yours) if you succeed, as a healthy local small business market is our bread and butter. We will use the classic bar example. If a new buyer comes to us and says “I want to buy a bar“, we should be asking questions instead of just emailing every bar listing in the area. Has this new buyer ever worked in the restaurant industry? If not, then buying a bar will likely be a huge mistake. Starting off as a new business owner and trying to learn an entirely new industry at the same time is setting yourself up for an epic failure. Does this buyer have a family that wants or needs them home in the evenings? If so, then working every afternoon and into the night is going to cause more family upheaval then it’s worth.



Deciding on a small business is a very big decision, and will need to take into account a variety of factors. The best way to weed through the choices that are currently on the market is to first do some soul searching and then figure out what your business ownership goals are. You will also need to use the assistance of a business broker. A good broker will not only help you find businesses that would be right for you, they can help you narrow the field to those businesses that will help you fulfill your goals.


Have you always had a dream business in mind but aren’t sure it would fit your goals for business ownership? Would you like to know what businesses are available that would work with your family schedule? Ask us! Leave questions or comments here and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

www.InfinityBusinessBrokers.com

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Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907




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