Posted in Become a Business Owner, Buyers Articles

Are you a buyer like this? Have you requested information on dozens of businesses and then when asked a question about one of these listings – you can’t remember which one we’re talking about?

Are you requesting and then signing Non-Disclosure Agreements (NDAs) like it’s going out of style? Guess what? You are probably NEVER going to buy a business. Never. Not going to happen. Why?

Dozens and dozens of NDAs is not the way a successful buyer finds and then buys a business.

Buying a business requires that you keep your eye on the goal – successful business ownership.

What do we mean by that?

First and foremost, signing the NDA should come after you’ve already made some decisions about whether of not a particular business is really what you’re looking for. You shouldn’t buy a business based on where it is, how it looks, or what the tax returns say. This is the information you will be able to access after you’ve signed the NDA. Sure, these are all important parts of a business, but as a buyer you need to be focused on whether a particular business is going to meet your goals for business ownership. The major mistake that unsuccessful business buyers and unsuccessful business owners make is they never considered what they want out of business ownership.

If your goal for business ownership is to have more time to spend with your family and the ability to do things like coach your kid’s soccer team – then buying the bar you think you’ve always wanted isn’t going to work – you’ll have to work seven nights a week. If your goal for business ownership is to make more money than you do at your current job, then buying a huge restaurant with zero restaurant industry experience isn’t going to work – you’ll be bankrupt in six months.

The path to a successful business purchase starts with a conversation. You and your business broker should have a talk about what your goals for business ownership are, about your prior work experience and about the amount of money you are looking to invest in a business. Then, and only then, should you sign NDAs for the businesses that will actually meet those goals. You might be surprised that a business you never would have considered on your own could be the perfect fit.

Narrow down your search, then request the information you need. This will help you keep your eye on the goal of business ownership.

Are you looking for businesses to buy but haven’t had a conversation about what your goals for business ownership are? Do you want to know more about how to successfully buy a business? Ask us! 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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Posted in Become a Business Owner, Buyers Articles

Ready to buy your own business?

Step 1: Arranging Capital

You could probably guess that step one is figuring out how you are going to pay for your new venture. 

If you don’t have enough cash on hand to fully fund the purchase of a business there are several resources available which you could tap. These options consist of acquiring funds from the Small Business Administration (SBA), traditional financial institutions like banks or seller financing.

No matter what the source of funds, any lender is going to have conditions which you will have to satisfy if you want to be approved for said funds. They are going to require you to have adequate cash readily available for a down payment in addition to having sufficient working capital to sustain the business.

You will need to be aware of and account for costs like closing fees. It is possible to either pay for the closing fees up front or plan to have them incorporated within the amount that you will be financing.

Having financing or at least a down payment in place before you begin your business search will simplify the process of finding the right business for you.

Step 2: Making Offers

You found a business that meets with your goals and have finished going over the initial financial records. You think this might be the business for you. It is time to make an offer, but how do you determine what that offer should be?

First, consult with your business broker. There are considerations that influence price such as the amount comparable businesses have actually sold for, the value of inventory and contracts, the amount of cash flow the business currently generates – the list goes on. By consulting with your business broker you can consider all aspects and decide whether the asking price is fair and how much you are willing to offer.

Step 3: Due Diligence

After an offer is accepted, the offer you submitted essentially becomes the purchase contract and you will move to the next stage – due diligence. This is a crucial step when purchasing a business.  It is due diligence which enables you to figure out whether or not this business is for you. It also helps to determine what price you will be prepared to pay for it.

Due diligence will begin with examining previous years of financial records. You will be able to learn about any unresolved legal actions, relationships with vendors and clients, intellectual property rights including copyrights or patents, as well as any future liabilities.

Once you have all the necessary information you can make an informed decision about whether or not to proceed. This is the nature and necessity of due diligence. Your findings during due diligence may also modify the amount you are willing to pay for the business. 

As soon as you have arrived at what you feel is a complete picture of the business and have also arrived at a price that takes into account what you found during due diligence – you and the seller will negotiate to amend the purchase contract and proceed to the closing table. This step typically requires using the expertise and negotiating skills of your business broker, and possibly a CPA and/or attorney to guide you through the process.

While buying a business might initially seem like a monumental task, when broken down into basic steps it is absolutely possible for any driven future entrepreneur. 

Do you have more questions about the steps required to buy a business? Would you like to know more about the due diligence process? Ask us! Please feel free to leave any questions or comments, 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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Posted in Buyers Articles

For most businesses, the time on the market between listing and selling is in the neighborhood of 9 to 12 months. The typical time between an accepted purchase contract and the closing table is somewhere around 30 to 90 days. These industry stats might be helpful for a business seller, but if you are a buyer – what does the process of buying a business mean in terms of time frame? How long will it take a buyer to buy a business?

The answer is it depends. And it’s really complicated.

Yes, that’s a terrible answer, but it’s the truth. Here’s why:

It depends on the industry.

Like any market there are waves of popularity for specific types of businesses – and if the type of business you are looking for is a hot commodity, it might take you a while to get your hands on one. Great businesses in popular categories land under contract very quickly, so you might miss out on a few before you get lucky. What that means for time frame is a lot of waiting around for another shot.

It depends on what’s for sale.

You might have a specific type of business in mind, but within that category the current choices on the market may not hit enough of your criteria to warrant a purchase. Like the popular industry problem we just talked about, waiting for a business to come up for sale that fits what you want could take a while.

It depends on the complexities of the purchase contract.

Even if you luck out and get a business that suits your goals under contract, the length of time to get from accepted contract to closing varies from deal to deal. Some close quickly, in a month or so. Some contracts need to be negotiated for over a year. It depends on many, many factors and varies considerably from deal to deal. You may have many aspects of the purchase contract to negotiate or it may be very straightforward. The only way to know will be to get to this phase of the transaction and then to have some patience with the process. 

It depends on the existence of financing.

If you aren’t paying all-cash for your new business (most people don’t), then the time frame can be prolonged because of financing issues. If you are working out a deal where seller financing is in the mix, that can add another layer to the negotiation process. If you are getting your funding through a more traditional lending institution or through the Small Business Administration (SBA), then the time table of that lender will also play into the mix.

It depends on the motivation of the buyer.

It can be really difficult to make a huge decision like the decision to buy a business, mostly because there is no such thing as the perfect business to buy. Many, many buyers (90%) enter the market and never buy anything. As such, looking at the average time it takes the full population of buyers to buy a business probably won’t be very helpful. You can also be extremely motivated and the business you’re hoping for just isn’t out there at the moment.

The point here is the length of time it takes you to find the right business and then reach a closing table isn’t as important as focusing on making sure the business you end up with fits your goals. It also isn’t as important as staying motivated and patient with the process. If owning a business really is in your future, you will be able to meet your goal.

Have more questions about the process to buy a business? Are you curious about what types of businesses are currently on the market? Use our Business Search tool by clicking here! Otherwise, 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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Posted in Buyers Articles

Buying a business is a big task, and there are many steps ahead of you that might seem ridiculous – but all are a necessary part of a successful business transaction.

The most important of these steps is the signing of confidentiality agreements and then keeping that confidentiality in place.

This can be a frustrating part of the process for buyers. The confidential nature of business sales means you can’t have all of the information you want the moment you want it – and you will have to sign non-disclosure agreements for each and every business you seriously consider, all without knowing very much about the business before you do.

Keeping the for-sale status of a business a closely-guarded secret is absolutely imperative for the health (and possibly survival) of the business. When people find out a business is for sale, they immediately assume the worst. A business for sale must be a business on the brink of ruin. Why would anyone sell a perfectly good business?

Well, there are a lot of reasons. Reaching retirement age, the desire to move to a new area, wanting to pursue a different business venture, reaching a pre-planned goal within a business initially purchased for the purpose growth and then a sale – all of these reasons mean a business is healthy, not failing.

In general, however, that false perception that a business for sale is a failing business can cause an enormous amount of havoc in an operating business. The entire staff can quit, customers can go elsewhere, contracts can be cancelled – all things that can severely affect the bottom line.

For you as a buyer, the confidential nature of business sales means you must sign non-disclosure agreements and you must abide by them. Period.

You can’t change the language of the agreement to remove the penalties for you if you break the agreement. Non-disclosure agreements come in a standard form used throughout the industry and are not open for negotiation. If buyers could change the agreement to remove the penalties for a disclosure, then there really isn’t any point in having non-disclosure agreements in the first place.

You also can’t tell anyone who is outside of the transaction that the business is for sale (like your mother-in-law, your neighbor, your golf buddies, etc.). The only people who should have access to any confidential information is the buyer, the seller, the brokers, CPAs and attorneys involved.  

While the confidential nature of business sales might seem like a giant pain – you should consider it a great thing for you as a business buyer. Confidentiality means that the business you want to buy hasn’t been trashed by the careless disclosure of it’s for-sale status by a buyer that considered it before you did. You will get your new business intact and healthy.

Do you have questions about non-disclosure agreements or questions about the business buying process in general? Please feel free to contact us here or comment below. We would be happy to answer any questions you might have.

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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Posted in Become a Business Owner, Buyers Articles

Buying a business might seem like a monumental task – there’s paperwork, red tape, negotiations, money – but there are better ways to go about successfully completing a transaction than others.

One of the best ways you can be a more efficient business buyer? Ask questions.

Of course I’m going to ask questions! What do you mean?

The process to buy a business starts with looking at general listings and pairing down the list of possible businesses provided by your broker to just a few. For those few businesses, you will be asked to sign a nondisclosure agreement for confidentiality purposes – and then you will be forwarded a marketing package that typically includes information about the business, the physical location, a financial overview, pictures, etc.

At this point many new buyers ask for a meeting with the seller or for a tour of the location, but if all you’ve done is glance at the marketing package – then a meeting or tour will probably end up a total waste of your time. When you are buying a business, you are buying cash flow – so the seller’s personality or the location decor really aren’t that important.

Why?

The only way to figure out if a business is really right for you is to dig deeper than just a cursory glance, and you need to do that deep digging right from the start so you can eliminate businesses that aren’t right for your goals – sooner rather than later. The more efficient path? Take a really close look at the information you’ve been provided and come up with a list of questions you’d like answered.

What kinds of questions should I be asking?

Every business is different, so your questions from one business may or may not be the ones you have for another. Here are some general questions to get you started:

What are the seller’s daily duties? What would a typical work day look like for me as the new owner?

How is the income derived? Is it owner-to-prove? What do the tax returns and P&L statements show as far as how much the business makes?

What types of licenses are required for this business? Would I qualify for those licenses?

The moral of the story is any question is a good question, for a couple of reasons. First and foremost it will help you weed out businesses that won’t fit with your goals and expectations. Second, your questions will help your business broker understand what is important to you so they can better refine the search for potential businesses.

Save yourself a ton of time and energy by carefully reviewing information and asking lots of great questions – before you sit down with sellers and go for a back-of-the-house tour.

Are you a new buyer who has additional questions about the process to find the right business? Would you like more pointers on the best types of questions to ask? Ask us! 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

No Comments »