Posted in Become a Business Owner, Buyers Articles

If you’re in the process of buying and selling businesses you know that such transactions are done under a strict veil of confidentiality – and for good reason. There is a pervasive thought that any business that’s for sale must surely be a business on the brink of failure, right? Why would anyone in their right mind sell a perfectly good business?

It turns out there a lot of good reasons to sell.

According to the Q3 Market Pulse Executive Summary retirement tops the list. In deals under $500,000 some 38% of sales are reported as occurring due to retirement of the owner, and that number jumps to 71% if the deal is for a business in the 5 million to 50 million dollar range. This makes sense – you own a business because that business helps you build wealth and you can cash in on that wealth for your retirement years. The Baby Boomers are at this stage, so there are likely to be many businesses in the market in the next few years as that generation passes the torch to the next.

For smaller businesses (think $500,000 or less) burnout is the next most reported reason for selling – at 19%. Larger businesses, however, don’t usually fall into this category (think less than 5%). In a small one or two-man shop, the daily grind can be intense and sometimes an owner wants to do something else. It doesn’t necessarily mean the business is in bad shape, it just means the person currently at the helm wants something else from life. Larger businesses are insulated from this because they naturally have a far larger staff and more resources to lessen the load on an owner.

Next up is new opportunities, although this reason for selling is most common in mid-size businesses (think 500K-2 million), coming in at around 17%. This is an unlikely scenario with very large businesses (think 5-50 million), where recapitalization is reported 16% of the time.

In smaller businesses relocation or family issues make up a decent chunk of the seller pool at 11%. Think a medical emergency that will pull an owner’s focus away from a business or having to move for a spouse’s job or to help an ailing family member in another state. This reason for selling drops to almost zero in larger deals, as again a larger staff can make it possible for an owner to shift their focus to personal issues.

What does this mean for you as a business buyer? It’s important to ask a seller why they’ve decided to put their business on the market, but reasons like retirement or a family emergency have little to nothing to do with the business itself. Take into account that there are a lot of really good reasons to sell a perfectly good business!

Are you looking at businesses to buy and have questions about how important the reason for selling is? Would you like to know more about how to determine if the reason for selling should be a concern? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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Posted in Buyers Articles, Sellers Articles

Sometimes the thing that derails a deal is so simple it doesn’t feel like it should have that much power. Someone says something crazy.

Maybe the seller divulges way too much information about the personal lives of employees, details which have nothing to do with an employee’s performance but make the buyer uncomfortable dealing with the seller going forward. Maybe an accountant (who has no experience with small business transactions) tells a buyer that the business is on the brink of failure even though it isn’t (and the accountant had no idea what they were talking about). Maybe someone’s father-in-law comes in at the 11th hour and tells one side that the contract they’ve negotiated for almost a year is invalid even though nothing could be farther from the truth. Maybe one side brings up something politically charged at a meeting and the meeting devolves into a screaming match.

What do you do if you end up in situations like these? Be ready for it to happen.

The chances of a deal going 100% smoothly from beginning to end is essentially zero. Know going in that the people who buy and sell businesses are a tough bunch. Big type-A personalities can clash over almost anything. Then there’s someone’s blood, sweat and tears being exchanged for a lot of money. Add to that someone opening their mouth when the smart move was to say nothing at all and you can be left with a big mess.

Keeping your cool when someone says or does something crazy will help you step back and look at the situation with a clear head. Does it really matter if the person one the other side of the closing table shares all of your political views? No. Does the opinion of someone’s father-in-law or an accountant who have very little to do with a deal matter? Not really.

The only way to determine if what you are dealing with is something that needs to end a deal (or is just simply someone opening their mouth when they shouldn’t) is with an objective view. When something in your deal goes sideways, when someone says something completely nuts, when unnecessary opinions poison the well – take a step back. Talk to your business broker about your concerns. Decide if what’s going on is really something that should kill your deal. If you are mentally prepared for something crazy to happen you’ll be ready to look at the situation with clarity.

Are you a business buyer or seller who had a deal go sideways and have a story to share? Do you have questions about how your business broker can be instrumental in navigating issues? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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Posted in Become a Business Owner, Business Broker Why & How, Buyers Articles, Sellers Articles

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Posted in Become a Business Owner, Buyers Articles

Business ownership daydreams are often of the Steve Jobs variety – dreaming up some fantastic new techy business idea, starting in your garage in your spare time and then ending up reinventing the world.

As fun as these daydreams are, they are extremely far from reality for all but a lucky few – and they derail many a prospective business owner from taking the plunge because business ownership and success at that level seem impossible to attain.

If you really do want to be an entrepreneur, there is a much more realistic and possible path. Buy a small, service-based business.

While owning a maid service or auto garage may not sound as sexy as becoming the next tech billionaire, this type of service-related business can absolutely give you the financial and life-goal rewards you are looking for – often without a massive amount of risk.

Here’s why:

Service businesses always have recurring customers.

Houses don’t stop getting dirty and cars always break, so owning a business that meets these type of everyday, every person needs means you never have to go far to get a new customer and with great service you will be able to keep the customers you have. This type of business is also easily scale-able. With a simple marketing campaign and a bit more staff you can make your business as large as you want it to be.

Service businesses can allow you to have a life, too.

If you choose something like an auto shop or maid service, no one is going to expect you to be open 24-7. You can choose to be on call for emergency situations, or you can staff accordingly to take emergency calls – but you don’t have to because the situations where you would be called to an “emergency” certainly wouldn’t be life or death. You can schedule your clients around your kid’s activities, your date nights with your spouse and your vacations.

It’s easy to keep a customer if customer service is your goal.

If you own a service business, that’s what you should be providing – service. Keep you customers happy and they will likely be a customer for life, as well as recommend you to their friends and family. Focus on a great customer service experience and your business will reap the benefits.

Need employees? They won’t be hard to find.

Most service-based businesses only require on the job training, so entry-level employees will be easy to find (and easy to replace if they don’t work out). The flexibility of this business model also means you will be able to offer your employees flexibility so they can have a life too – which means you can find and keep great employees to help you grow your reputation and brand within the community.

Business ownership doesn’t need to be grand, and it doesn’t need to be complex. You can make a great living with a service-based business while maintaining that all important work-life balance. You can be a great boss and an important part of your community as well. If you’ve ever considered business ownership but didn’t think you had what it takes to be the next Steve Jobs – you don’t have to. Small business ownership can mean serving the needs of your community today.

Have you always wanted to own your own business, but were too intimidated to start the process? Would you like to know what service-based businesses are available in your community right now? Ask us! Leave any questions or comments here and we would be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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Posted in Sellers Articles

If you own a business then you probably know that it can be hard to get a traditional lending institution like a bank to finance you. Small businesses are inherently risky, and as such banks are typically unwilling to help out.

If you’re trying to sell your business, you have to remember that most buyers aren’t coming to the table with an all-cash, upfront offer. All-cash buyers are very rare, so a business owner who is unwilling to work with someone who doesn’t have all-cash is going to severely limit their pool of prospective buyers.

To make your business available to a larger pool of people you can skip the traditional banks and offer seller financing. Why?

Seller financing solves a couple of problems.

First, your willingness to keep some skin in the game after a sale speaks volumes about your faith in the future of your business (even under new leadership). You are showing potential buyers that you know the business is solid and that it has the potential to make money going forward (otherwise you don’t get paid). This can really help reassure buyers who are going to be handing you a lot of money that you see the value in the future of the business.

Second, it does away with the extra complexity of a third-party loan in your deal. When it’s just you, your broker and your buyer working out a deal you don’t have to worry about extra timelines, paperwork and bureaucracy that comes with a more traditional loan – streamlining the process.

Third, your agreement isn’t contingent on current interest rates. Or on the whims of the market. A seller financing agreement is only between two parties, so it can look however those two parties want and is insulated from the market at large.

More good news? If the buyer defaults, you get your business back so your risk in a seller financing situation is relatively low.

The point here is although it would be nice to get an all-cash, full price offer on day one – reality is more likely. Offering seller financing opens your pool of buyers, keeps banks and market whims out of your deal and helps you show buyers you’re confident in the future. Ask your business broker about what a seller financed deal might look like for you.

Do you have more questions about how seller financing works? Would you like to know what a seller financed deal might look like for your business? Ask us! Leave us any questions or comments and we would be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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