Posted in Become a Business Owner, Buyers Articles

When you buy an existing business it comes with the seller’s personality, whether you like it or not. Their choices are everywhere – from the paint color on the walls to the employees they keep. It can be tempting to want to make your mark and change it into the business you’ve always dreamed of right out of the gate – but that is a colossal mistake.

Here’s why.

You bought an existing business because it’s existing. The doors are open and it makes money. It runs. Before you go gutting the interior, tossing the furnishings and replacing the staff you need to take a breath and instead start paying attention.

Why does this business work?

What parts of the decor, the current menu, the personalities of the staff, the operating procedures, the equipment, etc. add to the functionality and value of the business? 

What is it about this business that keeps customers coming back for more?

If you rush in and change everything, you are missing the opportunity to learn what makes the place successful. Listening and learning should absolutely be your number one priority in the early days of owning your new business. Take every chance you have to learn from the seller, even if you aren’t a fan. While you negotiate ask lots of questions and pay attention to the answers. Be willing to take advice. Most business purchase contracts come with a two week training period – use that time to absorb everything you can.

When the reins are finally yours, slow down. Run the business as-is for as long as it takes for you to truly understand what works and what doesn’t. Talk to the staff – ask them to give you their thoughts about what is important and what they would change if they could. Talk to the customers and ask them the same thing. What would they like to see changed and what would they like to see stay the same?

Take all of this data that you collect and then make small, incremental changes that will benefit the business. Don’t make changes just because it’s something you would prefer.

Are you considering buying a business but hadn’t thought about when and why you should make changes? Do you have questions about the training period in a purchase contract? Ask us! Leave any questions or comments and we would be happy to assist.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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Posted in Become a Business Owner, Buyers Articles

The entrepreneurial story we tell ourselves is full of flaws. You can’t come up with an idea in your garage or spy a cute coffee shop for sale downtown and simply waltz into your bank for a small business loan to cover the entire cost. It’s just not how it works. 

Why?

Banks are gun shy about risks in general, but even more so since the debacle of 2008. Small business ownership is risky, particularly if you are trying to start a business from scratch. According to the U.S. Bureau of Labor Statistics 65% of businesses fail in the first 10 years, 45% fail in the first 5. 

What that means for future borrowers is your local bank isn’t likely to grant you a small business loan for your start-up. They are also unlikely to fund the purchase of an existing business. 

If the bank is out, where can a business buyer get financing?

The most common source of funds is the buyer themselves. Using property for collateral, sourcing capital from friends or relatives or using savings can typically generate enough to buy a business. If you’re going to own your own business, you’re going to have to get comfortable with putting your own skin in the game. A caveat here, if you are borrowing form friends and/or relatives a handshake deal will not suffice. You really need to consult a business transaction attorney and have some sort of contract before you take money from people you know. It will save everyone involved from the issues that can quickly arise when money needs to be paid back.

Another common avenue is a loan from the Small Business Administration (SBA). This path obviously will have it’s share of red tape, and not all businesses currently for sale will qualify for this type of loan – but it can be a great way to secure a business without having to fund the entire purchase yourself. Talk to your business broker about how you might qualify for a SBA loan and what businesses currently for sale would work for this scenario.

In many situations a buyer can also get financing from the seller themselves. This is called seller financing and many small business owners use this as a way to attract buyer to their business. A seller willing to keep skin in the game says a lot about how they think the business will do in the future (if the business fails they don’t get all of their money) and it opens the pool of potential buyers to those who might not have all the capital they need up front. An important note here – no seller is going to finance the majority of the purchase price for a buyer. Buyers need to come to the table with a substantial down payment. Ask your broker if there are any seller financed businesses available in the industries you’re considering.

There are also creative ways to get a deal done. Earn-outs, angel investors and the like are possible – but unlikely. Your best bet as a buyer is to see how much capital you can raise on your own, research your options with the SBA and talk to your business broker about business owners who might offer you seller financing.

Have you always wanted to buy a business buy aren’t sure how to raise the capital? Would you like to know what types of businesses are currently offering seller financing? 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 Business Broker Why & How, Buyers Articles, Sellers Articles

If you’re in the middle of the process to buy or sell a business, it can be tempting to contact the other side without using your business broker.

Why?

Say you just have one simple question, and to get that question answered you would have to call your broker, your broker calls the other broker, they ask their clients and then the answer gets passed back to you in reverse order.

This might seem incredibly inefficient, but the system is in place for a reason.

Let’s use the same example. You only have the one question, so you skip the intermediaries and call the other side. The conversation starts out innocently enough, but then your one question turns into five more, and as you continue asking the person on the other side becomes very offended by your questions, gets angry, hangs up and then decides not to move forward with the deal. Your one question just cost the whole transaction.

Business brokers, also known as business intermediaries are there for one reason, to protect the transaction. This is an incredibly important role, as without an intermediary most deals wouldn’t make it to closing.

Business transactions are inherently complicated, as someone’s hard work and someone else’s money are about to be exchanged. Like it or not, both buyers and sellers in business transactions have a lot to lose, and many seemingly innocent questions and statements can be misconstrued as offensive and can cause deals to fall apart and both sides to lose money.

Another major pitfall of going around the intermediaries? In almost all business transactions, there is a training period that occurs shortly after closing. Want to know what’s not fun and is seriously unproductive? When a buyer and seller hate each other and then have to work together.

Don’t make the mistake of trying to go around the intermediaries in the process. Your broker is there to act as a buffer and is there to help you, so keep them in the middle and you will have a far better chance at transaction success.

Are you a buyer or seller who has questions about the role of a business broker in your transaction? Ask us! Please leave a comment or question here, and we will be happy to assist you.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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Posted in Buyers Articles, Sellers Articles

If you own a business, we know you’ve already thought about it. The endgame. Retirement from small business ownership. Travel. New adventures.

Sure, we’ve all had the daydreams. If you are seriously considering selling your business, these daydreams are going to need to take on a more concrete form. Have you sincerely thought about what you are going to do when you leave the closing table?

What do business sellers do when they’ve sold their business? It varies. Some fully retire, some go back to the 9 to 5 game. Others take up volunteer efforts. The most common thread we see, however, is that someone who has owned their own business isn’t very good at sitting around.

If you haven’t had the chance to really consider your post-owner life, here’s what we see most business sellers do – they buy a new business.

Although it might seem crazy, business sellers do typically end up heading right back into entrepreneurship. Most take a bit of time off to do all those things that owning a business won’t let you do – like going on a three week vacation – but then that entrepreneurial itch starts up again.

If this sounds like you, then considering what kind of business you may want for your next venture is something you can do long before you sell the business you have. Maybe you are interested in a different industry, maybe you want to work in the same field but you have another location in mind.

Whatever your thoughts on the matter are, it is a good idea to have a conversation with your business broker about your post-sale goals. This will give you first-crack at any great businesses coming up for sale and allow you to decide how much of the proceeds you would make for the sale of your current business that could be used for the purchase of a new one.

If selling your current business is something in your future plans, think about your post-sale goals. Perhaps a new business would be the best plan for you!

Are you a business seller who is considering buying another business? Are you curious about the businesses that are currently on the market that might be an option for you? Ask us! Please leave us a question or comment here, and we will be happy to assist you on your next entrepreneurial chapter.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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

When you enter the business-for-sale market, you will find that some businesses are listed really, really high – priced no where near what you would be willing to pay. If you are still really interested in the business, you can put in an offer that makes sense to you.

If these two numbers are so different, how do buyers and sellers come to an agreement on the difference?

Negotiations and intermediaries.

In business transactions, the buyer and seller are the boss. A business broker has to let a seller set the price of their business, and on the other side, whatever a buyer chooses to offer the broker must present to the seller. Business brokers are known as business intermediaries because they act as a buffer between the parties in a transaction so that the transaction happen.

Having someone in the middle allows a buyer or seller to ensure they are getting what they want, but the nature of business transactions means both sides can do or say whatever they want – which sometimes means one side offends the other and kills the deal.

If you are a buyer preparing an offer, and your broker is telling you that the offer is only going to offend the seller – it would be wise to listen. You always have the ability to walk away from the deal, but you would be surprised how many buyers and sellers are able to reach a middle ground that works for everyone if both sides are able to stay amicable.

The moral of the story? Listen to the advice of your business broker!

Are you a buyer who wants to know how to make offers that will keep both you and a seller happy? Ask us! Leave a comment or question here, and we would be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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