Become a Business Owner Archives - Page 14 of 20

Published November 25, 2019

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

3 Big Steps For Business Buyers

Published November 18, 2019

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

The Efficient Business Buyer – Less Meetings, More Questions

Published October 28, 2019

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

Burned Out? Ready To Buy A Business? Avoid The Steep Learning Curve

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

Published October 21, 2019

You are completely burned out. You hate going to work everyday, and all you want to do is do something completely different. You are considering making the leap and buying your own business – with the intention of buying a business that is the exact opposite of what you currently do. This could be a monumentally bad idea.

When you daydream about owning your own business, it oftentimes involves a business or industry that is completely different than the business for which you currently work. This “grass is always greener” thought process can be disastrous if you use those daydreams to inform your decision on what type of business to buy.

Business ownership is tough, especially if it will be your first time as a small business owner.

Your transition into entrepreneurship will come with a huge learning curve, so it is almost always a mistake to add learning a whole new industry to the already enormous task of learning how to run a business.

Staying within your industry or within an industry where you already have some practical experience will likely be pivotal to your success. You will be able to handle the day to day operations of your business because it is similar to something you have already done in a professional capacity.

Notice that we said “similar”. You don’t have to buy a business exactly like the job you left in order to reap the rewards of staying within your industry. Many industry skills from one specific type of business will easily translate to another. You can also go to industries where you previously, but not currently, have experience. The point here is a car salesman who has never spent a single minute working in the restaurant industry shouldn’t buy a huge bar.

The other reason to stay within your industry? Landlords. Many new to the small business world don’t realize that the vast majority of businesses exist in a space that is rented from someone else. Commercial landlords want tenants who will succeed, and have seen plenty of inexperienced business owners tank their businesses and stop paying their rent. Any landlord is going to want your resume to see if you know what you are doing before they lease you the space. Someone with zero experience in the business they are trying to buy will be hard pressed to find a willing commercial property owner.

If the thought of spending one more moment in your current industry makes you nauseous, have a conversation with an experienced and qualified business broker. You might be surprised to find multiple businesses that are different enough from what you currently do to make you happy – that will also allow you to use the skills and experience you already have. Don’t let burn out destroy your chances for successful business ownership.

Have you thought about buying your own business, but don’t know what type would work for you? Would you like to see what businesses in the current market meet with your business ownership goals? Ask us! Please feel free to leave 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

Learning To Love The NDA – Thoughts For Business Buyers

Published October 14, 2019

If you are a business buyer, you should absolutely love the business transaction process – especially the tenant of confidentiality and the need to sign non-disclosure agreements (NDAs). Why? Let’s first talk about why some business buyers hate NDAs.

When you enter the market to buy a business, many new buyers assume the process will be very much like the process to buy a house. Nothing could be farther from the truth. Buying a business does NOT involve looking up businesses for sale and then driving around to look at them before you pick one to buy.

Why? When you buy a business you are buying an existing, operating business.

In order for that business to stay existing and operating the fact it is for sale needs to stay a closely guarded secret. Confidentiality is key.

A breach in confidentiality and the disclosure that a business is for sale can mean very bad things. People naturally assume a business that is for sale is a business that is on the brink of failure, although this is rarely true. When a business sale is disclosed the staff can quit en masse, vendors can cancel contracts, clients can go elsewhere – the list goes on.

These potentially catastrophic consequences mean anyone who is interested in buying a business must sign the NDA before the name and location of that particular business is disclosed. Some buyers hate this and refuse to sign the NDA or fight with brokers about providing their own information to receive the NDA.

The information you provide in order to sign the NDA for a particular business is both simple and straightforward. You must provide your full name, your home address, your phone number and your email. Why do we need this information? Why can’t you use your P.O. box or a business address instead of your home address? The NDA you are signing needs to be tied to one individual – you – so the same address you use on your driver’s licence must be used.

If you really feel uncomfortable providing this information, you should consider that your simple identifying information is paltry in comparison to what a business discloses to you once the NDA is signed. Not only will you now know the name and location of the business that is for sale, you will likely gain access to financial information as well.

You should also consider that the information you provide to get the NDA is the same information you would provide when signing up for a discount card at a grocery store. It’s really not a huge disclosure of personal information when you think about it.

So why should you love the NDA? The business transaction process, including the NDA, ensures that the business you end up buying hasn’t had a catastrophic disclosure of confidentiality by you or any other prospective buyer before you get handed the keys. It means your new business will transfer to you intact and still operational.

Still need convincing that the NDA is a great thing for you as a buyer? Do you have additional questions about the business buying process? Ask us! Please feel free to leave 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

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Keep It Together – How A Business Buyer Can Help

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

Published October 7, 2019

Business transactions are complicated beasts, and as such they fall apart more readily than they stay together.

If you are looking at buying a business, you will need to do your part to keep your deal together if you ever hope to make the jump to business ownership.

How? By making sure you know what you want and what’s ahead of you.

Are you really, really sure that you want to buy a business? Small businesses are very rewarding ventures, but they are intense in terms of the time and effort that you will need to invest. Are you sure you want to make the move from a 9 to 5 job with two weeks of paid vacation to a life where the buck stops with you? Yes, small business owners decide what hours they work – but the hours necessary can be very long.

Do you have realistic expectations? Buying a business is absolutely nothing like buying a house, and it takes a lot of time and patience. It also requires many, many moving parts and a good deal of negotiation. Talk to your business broker about what the process will be like so you know what to expect.

Have you done your homework? Do you have the background and experience to own the type of business you are considering? It is far easier to buy a business in an industry where you have some practical experience because you will already know something about how the business is run. If you are trying to enter a completely new industry, you might give yourself an incredibly steep learning curve the moment you take over as owner.

Are you being honest about the funds you have available? Some new buyers assume that they will be able to finance most of the price of a business, or they think they will be able to negotiate for a rock bottom price. Neither of these notions are true. You have to be realistic about what the money you have available will get you, and you need to be upfront when asked to prove your financial capacity. Trying to pretend you have more that you do will absolutely blow up in your face and cause your deal to fall apart.

Are you prepared to be very, very patient? Like we’ve said before, the process to buy a business requires a lot of patience. There are contracts to put together and negotiate, licenses and permits that need to be obtained, meetings, conference calls – the list can be seemingly endless. There are also a lot of people involved – busy people like the brokers, the seller, attorneys, CPAs. Requests for documentation or finalizing of agreements can take a lot of time, so you need to remain patient with everyone involved if you want the deal done.

Do you have questions about the business buying process? Would you like to know what industries would be right for you? Ask us! Leave 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

Buying A Business? Why A Terrible Business Seller Isn’t A Bad Thing

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

Published September 30, 2019

If you’re new to the process of buying a business, you might wonder why business brokers exist. Can’t reasonable buyers and sellers get together and get a transaction all the way to the closing table?

The reality of the business game is there is very little chance of success when buyers and sellers go it alone. Why? Buyers and sellers don’t buy and sell businesses for a living.

If you are in the market for a business, then the person you most want sitting across from you at the closing table isn’t a seller at all. You want a business owner instead.

A business owner is someone who cares about the business they are selling. Their top priority isn’t how fast they can get out the door – it’s their bottom line. A business owner is focused on growth and getting the most money possible for their successful small business.

A business seller, on the other hand, is a temporary title. It involves gathering and assembling documentation and information about the business, being available to answer questions or requests and negotiation skills.

Someone who is a successful small business owner will not necessarily make a great and/or cooperative seller because selling isn’t their focus and it’s something they’ve never done before.

This is where the role of a business broker is critical and patience on your part as a buyer is a must. The person on the other side of the table isn’t a professional business seller, they are a professional business owner.

If it takes some time to have questions answered or get requested documents you shouldn’t be frustrated, you should be glad that they are focused on the running of the business you are about to buy. A business owner who doesn’t care about the day-to-day operation of their business could potentially be leaving you with a disaster the day you get handed the keys.

Your business broker is there to ensure the process goes smoothly, to keep the lines of communication open and apply the right amount of motivation to a seller so that they can both successfully run and sell their business. Have patience with the process – and with the business owner across the table.

Are you considering buying a business but have more questions about how the process works? Would you like to know how long it typically takes to get to a closing table? Ask us! Please leave questions or comments 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

The Toxic Myth Of The Perfect Business – How To Handle Messy Books

Published September 16, 2019

It is a very common complaint in the world of business sales. A buyer comes to the market with money in hand and ready to buy the right business – but every time they request financial documentation what they get is poorly assembled numbers, difficult to understand tax returns and no current financials of any kind.

Do they want to sell their business or not?

What you have to remember about the small business world is owning your own business is a tough and time-intensive enterprise. Small business owners are great at what they do, but most are not trained accountants. Many times record keeping and financial documentation fall down the priority list, and what a buyer is left with is what the seller was able put together in the short time the business has been listed.

When we take on a listing for a small business we often get handed nothing more than a big box of crumpled papers and register tapes – and have to figure out the numbers from there. This is not true of all small businesses, as some owners are better record keepers than others – but you have to remember that even a great business may not have the world’s most organized books.

It is also typically true that the larger the business is, the more likely it is that they have an accountant on payroll and therefore the more complete the records will be – but if you are in the market for a small business you probably don’t have the couple of million dollars you would need to buy one of these higher-priced and more-complete-records businesses.

What should I do then? How can I decide with seemingly incomplete records?

Have patience, and understand that you will never get perfectly organized books. What you will get is the opportunity to look at all of the financial records of a business once you have entered the due diligence phase. Your business broker will be there to help you, and if the books really are a mess then perhaps an accountant familiar with business transactions will be brought in.

What you can do as a buyer is use that not-so-pretty cursory information you get with your first requests – like P&L statements and tax returns – to weed out businesses that don’t suit you and focus a more thorough look on on the ones that do.

Are you in the market to buy a business, but are disappointed with the information you’ve been sent so far? Would you like to know more about how we as brokers turn that jumbled box of paperwork into use-able numbers? Please feel free to leave any questions or comments here, we would be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

Are Good Businesses For Sale? A Business Buyer Question

Published September 9, 2019

If you are considering a foray into small business ownership you may have a very common misconception – that any business that would be offered for sale must be a business on the brink of failure. This misconception probably comes from media portrayals of huge multi-million dollar mergers and acquisitions with the purpose of preventing bankruptcy or saving a major brand name. The truth is, however, that perfectly good businesses go on sale every day, from the small main-street shop to businesses that employ thousands of people.

Think about home sales. A home that is listed on the market might be a tear-down, but for the vast majority of home listings the house is in great shape. The same goes for businesses.

If good businesses do go up for sale, why? Why would someone sell a great business?

Business owners decide to sell for a myriad of reasons. Many of these reasons are similar to reasons one might give for listing a house. Maybe the current owner is looking to get a financial return so they can retire. Maybe they are looking to move to another area. Perhaps they have some sort of family situation that is forcing them to sell – the point is not every business on the market is teetering on disaster.

Ok, so how do you tell if a business on the market is in good shape (or not)?

Do your homework and ask questions. When you inquire about a particular business you will be given access to cursory financial information. You can use that initial information along with general research (like the business website, reviews, social media accounts, etc.) to determine if you want to move ahead in the business purchase process. If you are very serious about a business then conversations with the current owner, site visits and the like would happen next. After your offer to the seller has been negotiated and accepted you will enter the due diligence phase, where you will be able to pour over everything and decide if the business is still right for you.

You will have ample time and opportunity to discover any issues the business has, and then you will have the choice to proceed or stop based on what you find. Even if a business isn’t in amazing shape, it could be a good buy because you could pay less up front and then work to turn the business around. This is typically the path a serial entrepreneur takes, buying a business in trouble and then growing it with the intention to sell once the business has met certain markers for success.

The point is that there are lots of good businesses out there, and your path to business ownership will give you all the information you need to make an informed choice about what you are buying.

Are you thinking about buying a business but have more questions about the process? Would you like to know what kinds of business ownership opportunities are currently available? You can click here to search, or leave us any questions or comments here.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

Am I Buying The Building? Commercial Leases And Business Buyers

Published September 2, 2019

If you are new to the world of buying a business, then you likely have some basic questions that need to be answered before you really get rolling. One very common question we get from the curious future entrepreneur when discussing businesses to buy is:

Do I have to buy the building too?

The answer to this question is almost always no, as commercial leases are the norm in the small business world.

What do I need to know about commercial leases when I’m looking to buy a business?

First and foremost, you can’t simply look at the amount of rent the current owner pays and the length of time left on the current owner’s lease to understand the nuances of the commercial lease market. It is also very important to understand that while you as a new owner will get a new lease, the rent amount itself is unlikely to change in a major way (and if it does change it will probably go up, not down) – especially if the current lease has quite a bit of time left. The property owner already has someone who is committed to paying that rate for the remainder of the lease term, so they have no motivation to change the terms of the lease for a new owner.

Commercial lease rates depend on a large number of factors, but in general it will depend on where the business is located. In some parts of town you may be able to get a commercial lease at $8 per square foot, while in another part of town not far away the typical lease rate will be more like $40 per square foot. A property on a main street or in a plaza with a strong anchor business will fetch higher rent than a business somewhere off the beaten path. A location on the water will also have a higher rent rate.

If you are in the initial phases of searching for a business and think a particular rent rate looks ridiculous, don’t make a judgment on the business or the lease until after you have spoken to your business broker. They will be able to tell you if a lease rate is truly ridiculous, or (more likely) if a lease rate is in line with the current location of the business. It is also far more important to look at the cash flow of a business than to get hung up on the lease.

In terms of renegotiating the lease rate, it will depend on a number of factors – like the length of time left on the current lease and other factors (like location) that we’ve already discussed. In some business transactions there will be a little wiggle room on price – but for the most part a property owner is not going to cut a lease rate significantly for a new business owner.

While you won’t be able to cut the lease rate in half, you will more than likely get a chance to renegotiate other parts of the lease, like the length. For instance, if the current owner only has six months left on their commercial lease, you certainly can’t be expected to pay $100,000 for a business with no guarantee on the current location for anything more than that short amount of time. Your lease will likely be renegotiated for a much longer term, sometimes 5 or 10 years. Each situation and each property is different – so you will need the expertise of your business broker for this part of the renegotiation.

If you are new to the process of buying a business, don’t get hung up on seemingly high lease rates or on short lease terms. Your business broker is there to help you understand any lease and also to renegotiate a lease to best suit your interests as the new owner of a business.

Are you searching for businesses and have questions about why certain lease rates are so high? Do you want to know which areas typically have lower lease rates? Ask us! Please leave any questions or comments 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