When Life Gets In The Way: Why ALL Business Owners Need An Exit Strategy
Posted in Sellers Articles
Do you take a vacation by randomly driving to the airport with no luggage, walking in and buying a random ticket to a random place? No, you plan a trip by doing just that – planning.
This random vacation example might seem absurd, but when it comes to business ownership lack of planning can be a big problem.
How? Although small business owners have some 70-90% of their net worth wrapped up in their businesses, they often don’t have an exit strategy (according to the Q3 Market Pulse Executive Summary). There’s no plan in place for what to do when the time comes to leave the helm. This is obviously a risky mistake as you could be forced to leave an enormous amount of money on the table if forced to sell unprepared.
I’m not planning on leaving my business for a long time, why do I need an exit strategy?
Every single business owner needs an exit strategy from day one because life has a funny way of getting in the way.
You might want to own your business until your retirement years, but what if a family member in a different state suddenly needs you to relocate to help them through a medical emergency? What if your children and grandchildren live across the country and you decide you’d rather be closer? What if you have your own medical issues that keep you from your daily duties in your business for an extended period of time? What if there’s a major market issue, like a pandemic, that essentially halts your ability to keep your business in the black? What if you get too burned out from the daily grind and want out decades before you initially thought you would?
There are a lot of ways that life can get in the way of your long-term goals for business ownership, and the best way to protect your massive investment of time, energy and money is to have an exit strategy from day one.
Put together your game plan if you had to sell your business tomorrow. Keep your books in order. Talk to a business broker today about what your business would need if you had to implement your exit strategy suddenly, then follow through on that advice. Plan ahead so you’re ready if life gets in the way.
Do you currently own a business and would like to know more about how to put an exit strategy in place? Would you like to know more about how we help clients prepare their businesses for sale? 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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What Makes Someone Sell A Business? Insights From The Market Pulse Q3 Report
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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How To Keep Your Deal Alive When Someone Says Something Crazy
Posted in Buyers Articles, Sellers Articles
Scroll any social media platform you’ll eventually see footage of someone saying out loud what should probably have stayed an intrusive thought. It feels a little like people in general have less of a filter – and this can be an issue if you are trying to buy or sell a business.
Business deals are precarious things. They’re the culmination of seemingly endless hours of research, work and negotiation. One would think that a deal so carefully constructed would be sturdy in nature, but they aren’t. Business deals can and do fall apart all the time. Getting to a closing table is nothing short of miraculous because you are dealing with large amounts of money changing hands between people who have their livelihoods riding on even the smallest detail. It doesn’t take much to derail something that feels so high stakes.
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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Business Buyers + Sellers: Why You Should Prepare For The Last Minute Panic
Posted in Become a Business Owner, Business Broker Why & How, Buyers Articles, Sellers Articles
This one feels like it happens in every deal. The contract is nearly complete, the licensing is in the works, the closing date is finalized – and BOOM. Someone in the deal panics.
It’s usually over something seemingly small. A minor discrepancy in the inventory. Needing to change the date of closing to accommodate the schedule of an attorney – something that probably wouldn’t have mattered early on in the process.
In the closing days and weeks at a transaction, however, these minor issues can become deal killers. Not because they should be, but because everyone’s cold feet only need the tiniest of excuses to run for the hills.
Why are we talking abut this? As business brokers, this is one of the many parts of our job. We get deals through to closing by keeping everyone from panicking over something that isn’t significant enough to lose a well-prepared, fully-researched and amicably-negotiated deal. If you know going in that the other side (or you!) might try to back out of the deal over something that can be easily remedied as the closing day approaches – you’ll be less likely to be surprised by these last-ditch cold-feet moments.
Instead, you’ll see what’s really going on. A lot of money is about to change hands. Someone is giving their blood, sweat and tears to a stranger. Someone else is buying a job you can’t really quit on a whim. EVERYONE is nervous. The key is to keep your nerves from getting in the way of your better judgement.
If you’re in the home stretch an the other side suddenly wants to burn the deal to the ground over something trivial, don’t panic. Let the business brokers do their job and understand that these last minute issues can and do get resolved every day in the business marketplace. If it’s you that suddenly wants to bolt, call your broker and talk to them before you blow up your deal. Tell them about your concerns. Last minute doubts are sometimes valid, but it’s best to figure out if what you’re worried about is legitimate or just your cold feet talking – before you alert the other side that you’re out.
Remember that business transactions are a long process that sometimes get mired in the emotions of those involved. If you know going in that one or both sides might be apprehensive near the end you will be better prepared to deal with this potential issue.
Have you been a part of a deal that fell apart and have a story to share? Would you like to know more about what types of issues cause problems at the end of a transaction? 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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Why A Service-Based Business Might Be For You
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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