When You Can’t Make The Rent – Why Business Owners Need An Exit Strategy
Posted in Sellers Articles
It happens. You own a small business and something gets in the way. A recession. A pandemic. A family emergency. Whatever the root of your business woes – it sometimes gets to a point where your only choice is to lock the doors and walk away.
It doesn’t have to get there. If you plan ahead you can sell your business and get a return on all of the investment you’ve made long before you have to make any fatal moves.
A big, big caveat here. It takes time to sell a business, even one deeply discounted out of desperation. Most buyers aren’t going to want a train wreck – so if you foresee a struggle approaching it’s better to cash out before the situation becomes unfixable. If you’re feeling nervous about the future of your business talk to an experienced and qualified business broker now. Tell them what’s happening and ask if it’s time to list or if your exit strategy can wait a bit longer.
If your heart isn’t in it anymore, if your personal life needs way more of your attention than you can successfully give while still maintaining your business, if the metrics are telling you that you are no longer making enough for the business to sustain itself – it’s time to have that serious conversation. No one wants to admit defeat, but it’s better to admit defeat before there’s nothing left.
Selling your business or walking away doesn’t mean your life as an entrepreneur is over. It just means this path isn’t the right one at the moment. You can take the proceeds from your sale and invest in a different business or you can take some time to deal with whatever issues forced you to leave. There are very few successful business owners who got it 100% right the first time out of the gate, so be realistic with yourself and don’t give up on your goals because this time something got in the way.
If you are past the point of no return and are left with just liquidating assets, you probably need to do that before the landlord takes over. Read your lease carefully to see where the line in the sand is – where the landlord has the right to lock you out. Once that happens anything inside that business now belongs to them.
The message here is failure happens, but failure doesn’t have to cost you more than it should. You can get back a return and move on to something else.
Are you a struggling business owner who isn’t sure if it’s time to pull the plug? Have you owned a business you should have sold and have an experience to share? Leave any questions or comments here, or feel free to contact us if you feel like it’s time for that serious conversation – we’re here to help.
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Why You Should Keep Politics Out Of Your Business Transaction
Posted in Buyers Articles, Sellers Articles
This one probably seems pretty obvious. Two people who are essentially strangers are trying to put together a deal for the sale of a small business from one party to another. There are seemingly endless moving parts and points to negotiate, so just getting to a closing table sometimes feels like it takes a herculean effort. All throughout this process everyone needs to try their best to stay objective and keep their cool – but with someone’s blood, sweat and tears being exchanged for someone else’s hard earned money it can be tough to stay emotionless and not be offended.
Then someone starts talking politics.
We all know how divisive political conversations can be. They upend family gatherings and have turned into brawls on the street. Why are we talking about them? A simple political comment can snowball and end a deal.
You don’t have to be madly in love with the person on the other side of your transaction. What you do have to do is get along with that person long enough to put a deal together, close that deal and then go through a training period on the other side. The relationship between a business buyer and a business seller is so delicate intermediaries (business brokers) are needed to keep the deal on track and act as a buffer between the parties involved.
Why then would a person trying to make a deal happen for themselves throw a political grenade on the whole process? Just don’t. It’s a bad idea.
Everyone is entitled to their own political opinions. What you don’t need to do is share those opinions in an already tenuous situation that has big ramifications if the two parties reach a point where they can no longer communicate.
Ok, but what if I’m not the one who is always bringing up politics?
If you really want your deal to happen your best bet is to ignore those comments from the other side. Change the subject, walk away and communicate through your business broker as much as possible.
Are you buying or selling a business and want to know more about how business brokers can act as a buffer in a business transaction? Have you been a part of a business deal that went south because of a political clash and have a story to share? Please leave questions and comments here.
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Thinking About Hurricanes: Buying A Business In Florida
Posted in Become a Business Owner, Buyers Articles
Hurricanes. They’re an inevitability of living in Florida (or anywhere on the Gulf or East coast of the United States for that matter). If you’re in the market to buy a business, how much should hurricanes factor into your decision? It depends.
If you’ve decided that Florida is where you’d like to end up then hurricanes will just be something that happens. Your house will contain hurricane supplies and you’ll watch the advisories from the National Hurricane Center whenever a storm approaches.
If you are considering businesses, then factoring in hurricanes will depend on where you’d like the business to be and how your business might be affected by prolonged power/utility/internet outages. For instance, if you are looking for a beach bar on a barrier island you’ll need to be sure you consider that a bad hurricane that makes landfall where you are might cause catastrophic damage to your business. If you would be more comfortable with a business located in a more inland zone, you’ll still need to see where your business location stands in terms of evacuation and flooding zones. You need to think about how you will keep your business functioning if you lose power, water and/or internet access for days or weeks on end. If you’re considering that same beach bar, what is your plan if the business loses power and you can’t run the refrigerators that hold your inventory? If you can’t run your point-of-sale system without the internet, will you just revert to paper accounting or will you have a hot spot on standby? The point here is although hurricanes are typically an infrequent problem – the damage they can cause is something you need to think about when you are choosing a business based on location (and you need to consider your game plan if a storm comes you way).
When a storm does approach, you should be ready – long before the weather gets ugly. If your business requires power to run refrigerated storage systems (for example) you should invest in an on-demand generator system long before your first hurricane season. It can be difficult, if not impossible, to gather and install hurricane protections for your business if you wait until everyone is panicking and the store shelves are empty. If you think you want to secure windows with shutters or wood, get those installed or ready to be quickly installed outside of hurricane season. You also need to prep your business early as you will need to give your employees time to storm prep their homes before the storm rolls in.
You should also ensure you have the proper business insurance should the worst happen. You will need insurance for wind and water/flood damage, as well as enough coverage to replace your equipment, inventory, etc. should you need to or want to rebuild.
You should also be ready for the cascade of cancellations that typically happen when the forecast cone falls on your area, whether the storm ends up impacting you or not. You should also come up with a set of protocols – like when you’ll close up shop, how you’ll secure the business, what you’ll do post-storm and then go over that information with employees so everyone is on the same page at the start of every hurricane season.
Should hurricanes dissuade you from buying a business in Florida? No, not at all. Like earthquakes in California or tornadoes in the Midwest every area has it’s own unique natural disasters to consider and prepare for. Choosing a business in a hurricane prone area probably means that you’ve picked a business where there’s heavy tourist traffic (like the beach bar example) – so you need to weigh the potential for all the money you can make with the preparations necessary should a hurricane roll in.
Are you thinking about buying a business and are worried about the potential for hurricane damage? Would you like to know more about what Florida businesses can do to prepare for storms? Please leave any questions or comments and we would be happy to help.
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Buying/Selling A Business? When To Rebrand
Posted in Buyers Articles, Sellers Articles
What’s in a name? If we’re talking business names, then your name is your brand – the symbol of your reputation. As a business owner you should always have your eye on growth. Growth of your customer base, growth of your bottom line and perhaps most importantly growth of your reputation.
What if that reputation has seen better days? Whether you’re currently a business owner who is considering selling or a buyer looking at businesses to purchase a very important consideration is whether a rebranding is in order.
One of the first things a prospective buyer will do is pop your business name into an internet search engine and see what comes up. If you are thinking about selling your business, then this is something you should do for yourself long before you list your business for sale. What does your reputation look like? What does the community at large think of your business?
If your reputation isn’t the greatest (but is salvageable), then you need to work on changing that perception of your business. Take reviews and comments from former customers and try to make the changes that would turn any bad reviews into good ones. Many review sites will let you respond to reviews, and you should – to both the good and the bad. Customers want to know that their thoughts are being heard, so acknowledge anyone who took the time to review your business. Don’t attack customers with complaints – instead let them know they were heard and that you’ve made changes that would result in a better experience if they give you another chance.
If your reputation is atrocious – then maybe a rebranding is in order. This might be the path you need to take if you’ve lost the majority of your customer base. However, renaming and relaunching your business only works if you make major changes. A new name on the sign and business as usual isn’t going to help. Update menus or inventory, swap out staff, change operating procedures – you get the idea. Revamp your business and then let your new, improved numbers shine when you list your business for sale.
If you are a buyer, then you have to decide whether or not your will keep the business name when you take over. If the business has a good reputation within the community and you won’t be making any major changes (like turning a pizza place into a fine dining seafood restaurant), then you really should consider keeping the name so you can continue the brand presence within the community.
If the business isn’t well liked, then a name change is a great way to let the community at large know that big changes have taken place and create some curiosity that may bring customers back in the door. Just be careful with the name you choose. Your business name should make it clear what the business does, as well as give a good impression of the business at first glance.
Are you a business seller who wants advice about improving the reputation of your brand before you sell? Are you a buyer who wants to change the name of a business you are considering? Please feel free to leave us a comment or question here, and we would be happy to help!
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Seller Financing – A Business Buyer’s Best Friend
Posted in Uncategorized
If you are considering buying a business, you may have looked at prices of local businesses during a cursory search and wondered how you would raise the funds to buy one. In the vast majority of small business sales seller financing will be involved, which is great news for business buyers.
What is seller financing?
Seller financing happens when the business seller finances a part of the deal, essentially loaning the buyer a part of the purchase price.
Why does a buyer need to consider seller financing? Many buyers who are new to the business market initially look for traditional means of financing, like a loan from a bank. Unfortunately banks are often unwilling to finance small business deals.
Why? A bank typically only lends money if they are sure they will be repaid and if there is collateral equal to the amount loaned they can take possession of in the event of a default. A house fits this mold quite well, as a home buyer must prove steady income before getting a loan and the house itself will serve as collateral because the bank can sell the house without having to take a loss (because the home will not lose value simply because the ownership changed).
This is not the case with a small business. When a small business changes hands, in the eyes of a traditional lender the very experienced management/ownership is being replaced by new (and therefore inexperienced) management/ownership. In addition, the value of a business is not just found in the tangible assets alone, so a bank would not be able to recoup any losses by selling the business if a new owner defaults on their loan.
What this means for the business market is traditional financing is highly unlikely, so if a business seller wants to get a deal done they can either wait for the ever-illusive all-cash offer, or they can offer to finance part of the deal.
What does a deal using seller financing look like? The answer is it really can look like almost anything. Typically the buyer must come with a substantial down payment, and the deal is structured so in the event of a default on the financing, the seller takes back the business. Many seller financing deals also include provisions where inventory must be kept at a certain level (so the seller wouldn’t have to replace the inventory after taking the business back).
Why is seller financing great for buyers? First and foremost, it allows buyers to buy businesses that would be beyond the reach of those without a substantial amount of cash. Second, it forces a seller to keep some “skin in the game”, meaning the seller has a vested interest in keeping the business going and profitable long after the business changes hands, otherwise they won’t get paid back. Sellers who are willing to offer financing will typically be much more helpful for a new owner with regards to training and motivated to build the business with an eye on the future.
If you are a buyer interested in looking at businesses where seller financing is an option, talk to your business broker. They will be able to find a business that will fit with your goals.
Are you a buyer who has more questions about seller financing? Would you like to know what a seller financing deal would look like for you? Please feel free to leave us a comment or question, and we would be happy to help.
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