Buying A Business? The Importance Of A Narrow Focus

Here’s one we see all the time. We get a call or an email from a buyer who wants to sign 15 NDA’s on 15 different types of businesses so they can see where each is located and then decide which ones they like.



First of all, any business broker worth their salt is not going to disclose that many listings to a buyer all at once. Why? A buyer looking at 15 different types of business hasn’t narrowed their search, so disclosing all of those businesses puts the confidentiality of those businesses at risk unnecessarily. It is also a colossal waste of both the buyer’s and broker’s time to fill out all of that paperwork for nothing.



You might enter the business marketplace with only a vague idea of the kind of business you want, but you really need to narrow the focus of your search right away if you want to have any kind of success with finding businesses that will actually help you achieve your goals. There are hundreds of potential listings out there, and it can be easy to get overwhelmed by the choices.



How do you narrow your search?



Talk to a business broker first.



We will ask you about your goals for business ownership. What do you hope entrepreneurship will bring to your life? The freedom to make your own schedule? More money than you make at your current job? More time to spend with your family? The ability to grow a business to sell a few years later? These goals will be very helpful in eliminating businesses that don’t fit the bill.



We will ask you about your prior knowledge and experience. What industries have you worked in? What did you go to school for? Taking over a new business is hard enough, you probably don’t want to add learning a whole new industry to the mix at the same time.



We will ask you about your financial situation. How much do you have to invest? Are you looking for financing? Knowing from the very beginning exactly how much you have to work with will be instrumental to ensuring you end up with a business you can afford.



After having this type of discussion with your business broker, you can focus on businesses that will fit all of your needs and not waste any of your time looking at businesses that don’t. Narrowing your focus early also helps you keep from feeling like your search never ends.



Are you starting your business search and need help with narrowing your focus? Are you curious about what businesses are available in your area? Do a cursory business search by clicking here or leave us any questions or comments below.

 

 

 

 

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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Business Debt? Why You Should Consider Paying It Off

Debt happens, especially in the day to day operation of a small business.

 

You might owe money to your vendors, you might owe your landlord – small business debt comes in many forms. Here’s the thing:

 

While most of the time debt is a perfectly acceptable thing to have on the books – the perception of that debt by buyers might hurt your chances of selling.

 

Why? New business buyers will probably be freaked out by debt. They just will. They don’t yet understand how debt is used to run a business, and they will also be looking at businesses other than yours who have no debt at all.

 

While it may not be possible to completely eliminate your business debt, if you are considering selling sometime soon you might want to consider paying down as much of it as possible. It will add money back into your books – money you can leverage for a higher sale price.

 

Another reason to pay off the debt before you try to sell? A buyer might insist you pay off the debt with the proceeds of your sale, so leaving it on the books will only decrease the amount you walk away with.

 

The message here is while it may leave you a bit strapped on the cash front, paying off any business debt before you list on the market will make your business more appealing to buyers and will help you negotiate for more money at the closing table.

 

Having to live a bit cash-strapped may also help you tighten up your budget by streamlining your spending. It can motivate you to implement your ideas for growth that bring more cash in the door – all things that will make your business stand out from others on the market.

 

Are you considering selling your business but have more debt on your books than you’d like? Would you like to know how a deal that involves debt might be structured? Please feel free to leave any 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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Buying A Business? Focus On Cash Flow, Not Assets

What should you care about, assets or cash flow?

 

When you begin the search for a business to buy, your initial tendency might be to think about buying a business in the same way you would buy a house. Buying a home or buying property means you are exchanging money for something physical – a structure or a piece of land.

 

Many new business buyers apply this same logic to the purchase of a business, focusing on the assets or inventory of the businesses they find interesting.

 

If you are buying a house, the finishes and included appliances absolutely factor into the price, but using the perceived value of the comparable physical assets found in a business (like a kitchen hood or vehicles) to judge a listing price won’t work.

 

 

Why? When you buy a business, you are buying cash flow. You are buying an income stream that is generated through the use of the assets – but the truth is most small businesses don’t have many assets to speak of. Most of the time, the physical location of a business isn’t owned by the business owner – a commercial lease is in place. In some cases, the equipment that has been installed (like the hood system in a restaurant) belongs to the landlord as well.

 

We will use the restaurant example to further illustrate this point. When you buy a restaurant, the expectation is that all of the equipment is in working condition, like the grill in the kitchen. You are buying the cash flow that is generated by the use of the working grill. The grill is critical to generating that cash flow, but outside the confines of the business the grill has no value on its own to a business buyer.

 

There are a few instances where the physical assets, like a grill, will play into price. As we just mentioned, the expectation is that everything is in working condition. Excessive equipment, not enough equipment or equipment that isn’t in decent working order can decrease the amount you as a buyer offer on a business – as in each of these scenarios you will have to make changes in order to get the business in proper working order when you take over.

 

It is important to note, however, that not liking the aesthetics of the equipment doesn’t mean you can discount it. If you are looking at a house with granite counter tops and you only like quartz counter tops – this aesthetic difference doesn’t mean you can take $10,000 off of your offer. The same holds true in business transactions. If the business has the necessary working equipment, then it has the necessary equipment- ugly or not. Your offer and consideration of each business should be based on cash flow, not assets.

 

Do you have more questions about how to evaluate the listing price of a business? Would you like to know more about how to use cash flow and multiples? Ask us! Leave any comments or questions 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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Want To Buy A Bar Or Restaurant? Maybe You Shouldn’t

“I’ve always wanted to own my own restaurant”

 

We hear this one a lot. You might have a passion for great food, you might love the bar scene – but these loves from the patron perspective rarely translate to success on the business ownership side unless some basic requirements are met.

 



What are these requirements?



Experience



There are very few people who have little to no restaurant industry experience that have succeeded as the owners of a food service establishment. More often than not, the restaurant industry rookies that manage to buy a bar or restaurant drive it right into the ground in a shockingly short amount of time (we say “manage to buy” here because many property managers will refuse to issue a commercial lease to restaurant newbies).



The food service industry is rough. It requires an enormous commitment of time and energy. It requires the personality to wrangle a staff of typically young and inexperienced servers and bartenders while simultaneously ensuring no one is giving away your food and booze or taking money out of the till.



Sounds like fun, right? Not so much. If the restaurant industry is your passion, and you’ve spent a good deal of your working life learning the ropes as an employee or manager in this industry – then restaurant ownership will probably bring you success. If you don’t have the passion or experience, you should seriously, seriously consider something else.



Enough Capital



If you have $100,000 to invest in a restaurant, then you shouldn’t be looking at restaurants in the $100,000 price range. Why? Writing a check for the full amount of money that you have just to take ownership of a restaurant or bar means you are setting yourself up for an almost immediate failure. Working capital is essential in any industry, and the restaurant industry is no exception.



You will need money available for the litany of licensing requirements necessary for establishments that serve any form of alcohol. You need capital available to cover payroll for the first few weeks after you take over. You need the money to pay your vendors for the inventory you need to keep your patrons fed and happy. You need enough money to keep the doors open long enough to start turning a profit with you at the helm.



Consider the need for working capital when deciding what you can and can’t afford in the restaurant-for-sale market long before you start writing any checks.



Willingness To Work 24/7



If you are someone who is very involved in the lives of your children and need to be home every evening to help coach their soccer team, then buying a bar is probably not for you. The restaurant industry requires long, weird hours (think about when most restaurants and bars are open – like nights and weekends), so if the life you want to have outside of business ownership does not jive with these hours you might need to consider another industry.  



It’s also not for you if you are the kind of person who likes to take a handful of long vacations every year. This industry deals with a lot of cash, and as such it is an industry where it is incredibly easy for employees to steal a little off the top. Successful restaurateurs are vigilant and omnipresent in their establishments to ward off these sticky finger issues.



If you have the drive to keep strange hours, the experience to get you through and enough capital to pay for the bar or restaurant you are interested in – then you have a great chance at success. If not, then there are plenty of other industries where you can meet your goals for business ownership without having to serve food or sling drinks. Talk to your business broker today about your goals and experience and they can help guide you to the right business.



Have you always dreamed of owning a restaurant, but don’t believe us when we say prior restaurant experience is a must? Have you had a disastrous restaurant or bar ownership experience that could help others that you’d like to share? Please feel free to leave comments or questions here and we will 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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Selling Your Business? How Eye Rolling And “Obvious Solutions” Can Kill Your Deal

 

It can be really, really annoying when you sit across from a business buyer who thinks they know everything.

 

They have the fresh-faced optimism of someone new to the world of entrepreneurship – an optimism you once had until the grinding reality of business ownership taught you what it’s really like. Owning a business is tough, and growing that business is even tougher. You’ve spent years trying and failing (and trying again) to get your business to where it is today – and now that business is under the scrutiny of someone who knows little to nothing about it.

 

Most buyers are going to look at your business and see things that they feel are obvious solutions – to growth, to staffing issues, to costs – but for you those “obvious solutions” are non-starters because you’ve already tried them or because the nuances of your business would make them impossible. 

 

Here’s the thing – buyers are probably going to ask you why you haven’t implemented their “obvious solutions“. It’s going to be very, very annoying when they do. Your job in that moment is to resist the urge to roll your eyes or groan. Don’t be short or snarky either. Blowing off a buyer’s thoughts on your business will almost certainly turn them off. It can also discourage a buyer from considering your business because your terrible reaction just told them there isn’t any room for growth. 

 

So I’m just supposed to sit there and listen, even if their idea is awful?

 

Yes. When buyers ask about why you haven’t done one thing or another, you need to respond in a positive way – like this:

 

Sure, we tried something similar to that, but we didn’t have much success because (fill in the blank). Maybe the timing wasn’t right or perhaps we could have implemented the idea differently. If you try a different approach maybe it will work for you?

 

See how much better that sounds? Your answers to questions about “obvious solutions” should contain the details of what you tried and why you felt it didn’t work at that time. You should also give buyers who ask this question examples of ideas you’ve had that you were unable to implement because of financial or time constraints that may not be an issue for a new owner. By handling their questions this way, you are showing them that as the owner of the business you were open to new ideas and had an eye on growth – even if those new ideas didn’t pan out the way you’d hoped they would.

 

The message here is you don’t want your grumpy, negative response to a buyer’s idea to tank your deal. Every business has room for growth, and sometimes it’s the craziest ideas that get the biggest bang for the buck. Keep your answers to questions positive – and don’t roll those eyes.

 

Are you getting ready to sell your business and are wondering what else buyers might ask you? Would you like to know more about how buyer meetings typically go? Ask us! 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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Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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




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