Become a Business Owner Archives - Page 6 of 20

Buying A Business And Legal Advice: When To Take It With A Grain Of Salt

Published April 21, 2022

Buying a business is a huge deal. Businesses are complicated, there’s a lot of money changing hands, contracts can be long and need to be carefully negotiated. As a buyer you should absolutely have legal council and they should absolutely go over anything and everything you sign.

So why are we saying you might want to take legal advice with a grain of salt?

First and foremost, business ownership is inherently risky. Entrepreneurship can be rough and there’s no guarantee that the contract you put together for the purchase of a business is going to ensure that you as the new owner will be successful. Purchase contracts are also heavily negotiated, meaning one party (you) will not get everything you want. There will be concessions with the seller if you want a business transaction to happen.

Think about the job you’ve hired your attorney to do. Their job is to protect you from any and all risk. Their job is to make sure you get everything you want. See where the problem is?

Here’s another issue. There will be some documents that you need to sign that are industry standards, like the non-disclosure agreements necessary to receive most information on businesses for sale. These industry standard documents can’t be changed, so if your attorney asks to make changes the answer is likely going to be no. You will have to sign the agreement as-is or not get the information you’ve requested.

It’s also important to remember that there are many, many specialties in the legal field. Your family attorney who helped you with your uncle’s estate and the probate process isn’t likely to know very much about the legalities of a business transaction. It’s why you don’t go to your kid’s pediatrician if you have arthritis in your knee. You would be better suited hiring an attorney who works in the business transaction arena as they will know how to best protect you without hampering your ability to buy a business.

We aren’t saying you shouldn’t take your attorney’s advice. You definitely should. What we are saying that you need to take that advice as it is meant – to completely and totally protect you. You also need to be sure you are hiring the right type of attorney to give you the best advice possible.

Are you considering business ownership and hadn’t thought about finding a business transaction attorney? Would you like to know more about the documents that you’ll need your attorney to review as part of the business buying process? Leave us any questions or comments, we would be happy to help.

Michael Monnot

Why Business Buyers Should Consider Customer Diversity

Published April 11, 2022

When you are looking at buying a business, one aspect of any business you will need to consider is the size of the customer base. Ideally, you should look for businesses with a large number of clients spread out over many accounts where each client makes up only a small portion of the total revenue.

Why is this important?

A company that has one (or just a few) large client(s) who make(s) up a very large percentage of revenue can be problematic.

Here’s an example. A lawn service company has a handful of independent regular clients, but the majority of their business is for a large real estate firm that has a contract with them to maintain the lawns of homes that are on the market. This one client makes up 70% of their revenue. Say you purchase this business, and then three months into ownership the real estate firm is bought out by another company who already has a lawn service contract in place. In one swift move, 70% of your revenue goes up in smoke.

The way to avoid this pitfall is to look for a diverse customer base when you are screening prospective businesses. Ask yourself these questions as you consider a business:

What does the customer list look like?

How does the business acquire new customers?

What is the cost of customer acquisition?

What kind of customer retention does the business currently have?

On the other hand, what if you find a business that you really like, but the customer list isn’t very diverse? Does that mean you shouldn’t buy it? No, but it does mean that creating customer diversity needs to be priority #1 the day you take over as owner.

Only you can decide which business is ultimately right for you and for the goals you are hoping to achieve. You just need to be aware of the inherent perils that exist when you are buying a business with a very small customer base.

Are you looking at buying a business, but are curious about what a diverse customer base would look like for a particular industry? Do you have concerns about a business you are already considering? Ask us! Please feel free to leave a comment or question here, and we will be happy to help.

Michael Monnot

Buying A Business? Invest Your Time + Energy For Success

Published April 4, 2022

When you are serious about buying a business and ready to jump into the process, you aren’t going to show up one day and own a business the next. It’s going to take time. Probably more time than you thought. Most business transactions take months to get from the initial interest of a buyer all the way to a closing table, and that’s if both sides agree on most things.

Why does it take so long? Small businesses are complicated animals, and business transactions have a lot of moving parts. On the buyer’s side of the equation you will be putting together offers, going through documentation, getting your own licenses and permits sorted out, negotiating with sellers, meeting with attorneys and CPAs, talking to your business broker, touring physical locations, negotiating with your commercial landlord, having meetings and conference calls with the seller – you get the idea. It can at times feel like you have a new part-time or even a full-time job.

If you really want to buy a business you’re going to need to make the time to do the things that need to be done. You can’t come in and expect it all to be finished in a few days with very little effort on your part. You’re going to have to spend evenings researching. You’re going to have to be patient with the negotiation process. You’re going to have to be willing to put in the work to provide the information about yourself that’s requested. You’re going to have to get your license and permit applications done. You’re going to have to make lots of phone calls and have lots of meetings. It can feel like a long list – but it’s not impossible.

If you’re worried about the amount of time and effort you’re going to have to put into buying a business, don’t. Small business ownership is a life encompassing affair – so if you aren’t willing to put in the effort and energy it’s going to take to get through the business buying process you probably shouldn’t be buying a business in the first place. Remember that all the work that you do before you sign at the closing table is work you are doing to help yourself. All of the time and effort you spend up front will be instrumental for setting you up for success in your new business venture.

For example, the bureaucracy that is the licensing and permitting process for small businesses can be complicated and slow. If you drag your feet on licensing and permitting requirements, putting everything off until your closing date is looming, you’re going to be scrambling when the business keys get handed to you and you’re not properly squared away in terms of license requirements. In many cases if you haven’t worked out your licensing requirements you won’t be able to open the business until you get it straightened out. If you stay on top of what needs to be done you won’t cause yourself any issues when it’s your turn to take the reins.

The message here is you need to be prepared to spend some time and exert some effort if you want to become a business owner – but all the work you do will pay off once you get handed the keys.

Have you always wanted to buy your own business but are worried about what’s required for the transaction process? Would you like to know what businesses are currently available that would meet your goals for business ownership? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

Planning Your Trip: 3 Tips For Relocating Business Buyers

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

Published March 28, 2022

Maybe it was the lockdowns of the pandemic. Maybe it’s just that you’re burned out. Whatever the reason, you’ve been daydreaming about moving somewhere else and buying a business. Guess what? There’s no better time than now to make the leap.

Want some tips on how to start? Here’s 3:

Do lots of research:

This one might sound obvious, but most people would be shocked at how little research most buyers do before taking a huge leap like this. Take a deep dive into the locations that interest you. If it’s somewhere you’ve only ever visited on vacation, research what it’s like to live there year-round. Is it a seasonal economy that you’ll need to account for when choosing the type of business to buy? Can you afford to buy or rent a home close enough to your business to make your commute make sense? If you have kids – what are the schools like and where do you need to live in order to get your kids into a school where they’ll be successful? What are the property taxes like? Are crazy weather events like hurricanes something you need to think about? The point here is you need to have a good handle on where you both want to and realistically can be long before you start a serious search for businesses to buy.

Find the right help:

If you’re serious about buying a business in a new area, a local business broker is going to be an immense help. They know the area, the local small business economy, the local licensing/permitting requirements, the major players in terms of commercial property managers – the list goes on and on. Having someone with local experience as your guide will make both finding the right business and navigating the buying process much easier than going it alone or using someone who doesn’t know the area.

Have the site visits planned way before you leave for your trip:

Seeing a business you are considering is an important step, but what many buyers don’t understand is this step never comes first. Businesses are bought and sold under the protection of confidentiality (see why here), so you can’t just fly into town and waltz into whatever business you please. The steps that are required before you set foot in a physical location go like this:

You talk to a local business broker about your goals for business ownership, the industries you’re interested in and the amount of capital you have to invest. They find you business listings that would match your goals and means. If any of those listings look promising you can request more information by signing a non-disclosure agreement for each business you’re still considering. After looking over the information a conference call with the sellers is next, so you can ask questions about the business and see if it’s still a good fit. If after your calls you’d like to see the physical location this can be arranged. It usually requires seeing the business before or after hours when no staff or customers are around and will need to be coordinated between the schedules of the seller, the buyer and the brokers involved. It should be obvious that this process can’t be completed once you’ve landed on your scouting trip and have called a local broker for the very first time. You need to plan your site visits when you are doing your initial trip planning – like before you’ve even bought your plane tickets. It is a colossal waste of your own time to fly in and see businesses you haven’t already vetted, so plan your trip with that in mind.

If you’re considering a big move – now is the time. Contact a local business broker and get the process moving!

Have you always wanted to move somewhere else and own your own business? Do you have more questions about the steps of the business buying process? Ask us! Leave any questions or comments and we would be happy to help!

Michael Monnot

It’s Never The Perfect Time – Why You Should Buy That Business NOW

Published March 21, 2022

We all have the dreams. Dreams of quitting the job we hate, of striking out on our own and finally becoming our own boss.

What stops us? Taking a huge leap into the unknown can be absolutely terrifying.

No one wants to fail, and to prevent that failure we try to get our ducks in a row before we make big changes. Like waiting for a housing market peak before listing your house for sale. Like detailing your car before you sell it. We all strive for things to be perfect when we’re about to take a big step.

Here’s the thing about that push for perfection. It can hold you back.

Entrepreneurs can’t be risk averse. Buying or starting a business, operating that business, growing that business – all of these come with their fair share of risk. Guess what? If you need to be comfortable with risk you can’t also demand perfection.

Any business you look at will have a few skeletons. The news is always going to look bleak. The timing could always be better.

You can always find a reason not to do something. That’s the path of least resistance. If you don’t let go of your hope for perfection you aren’t going to be able to achieve the dreams, take the leap or change your life.

Should you disregard what’s going on in your life, disregard global catastrophes or settle for something that isn’t ideal? Of course not. The point we are trying to make is you can’t chase your dreams of business ownership if you always wait for everything to be just right.

If you really want to own your own business but aren’t sure if you’re ready or aren’t sure that the timing is right – have a conversation with an experienced and qualified business broker. They can help you decide what types of businesses would fit with your dreams and goals for business ownership and also give you guidance on the current state of the market.

Don’t wait for the perfect time to buy a business because that time will never come. Instead, have a conversation about your goals for business ownership and get started on the path to the life you’ve always wanted – today.

Have you always wanted to have your own business but aren’t sure if now is a good time? Would you like to know more about the business buying process? Ask us! Please leave any questions or comments and we would be happy to help.

Michael Monnot

A Business Is Not A House – And Why This Matters

Published February 28, 2022

Yes, we know. Obviously, a business is not a house. Here’s the point we’re trying to make:

Some prospective business buyers approach the business buying process as if they were buying a house or maybe even a car. This is an enormous mistake.

They typically call us when they’re already in town, a trip that’s been planned for weeks or months. Did they have the foresight while planning this trip to think of talking to someone about looking at businesses? Nope. They just call to say they’re here. They want us to drop all of the clients we already have meetings and calls with that day to drive them around so they can look at the physical locations of all of the businesses that are currently on the market. They then expect that we can waltz into any business that seems to interest them, introduce ourselves to the staff and management – and ask why the business is for sale.

This is NOT how you go about buying a business.

You can’t treat a business like a house for a lot of reasons. An operating business is just that – operating. It has a staff, vendors and competition. It has customers on site.

There is a misleading perception that any business for sale is a business on the brink of failure. It is this perception that can cause catastrophic losses and serious ramifications if the for-sale status of a business is disclosed to the wrong people (think the staff, vendors, the general public and the competition). An entire staff can quit. Customers can cancel contracts. The list goes on. Confidentiality in business sales is key, so anyone who is serious about buying a business needs to play by the rules of confidentiality. Those rules take planning and they take time.

How should you buy a business?

If you’re looking for businesses that aren’t in your current area, you should call and talk to a local business broker while you are buying your plane tickets or setting up your travel plans to visit your future relocation spot. Talk to the business broker about your goals for business ownership, the industries that you’re interested in and the areas where you have practical experience. You and the broker can spend a few weeks researching and searching – looking for the right business opportunities in your new area.

Once you have found a few businesses that interest you, you will be required to sign non-disclosure agreements before you are allowed to know the business name or location. The non-disclosures will also give you access to further information, things like P&L statements and past tax returns. You can use that information to narrow down your choices and then request a conference call with the sellers of the businesses that still interest you. By looking at the cursory financial information and talking to the other side you can decide if any of the businesses on your list will still fit with your goals. Those that do will be your final list, and these are the businesses worth seeing in person.

Some buyers have a hard time with this concept – that they can’t tour physical locations as the first step. Here’s what you need to remember: an operating business has value because an operating business creates cash flow. You are buying this cash flow – not a physical space, so seeing it in person isn’t as important as it would be for something like a house.

The veil of confidentiality is also so crucially important, even for you as a buyer. You wouldn’t want a business that you are seriously considering to be destroyed by someone else’s careless disclosure of the for-sale status – so understand that the process is built to protect the business that might be yours someday. You will need a bit of patience to see the process through to the end.

Don’t treat buying a business like buying a house. Remember that you are buying yourself a future life, and for such an enormous endeavor some pre-planning must take place – so call a business broker long before you get to town.

Are you thinking about buying a business and have more questions about the business buying process? Would you like to know what types of businesses are currently for sale in the areas you’re considering? Ask us! Please leave any questions or comments, we would be happy to help.

Michael Monnot

Buying A Business? Why You Should Be Decisive And Make An Offer

Published February 21, 2022

You think you’re ready to buy. You’ve researched the market and found that in the industry you’re considering there is room for growth. This industry will suit you because you already have practical experience and familiarity. You’ve searched for businesses and discussed the options available for sale with your business broker, and you’ve settled on one choice that really interests you. The next step is to make an offer – but that idea seems terrifying. What if it turns out this isn’t the business for you?

It’s hard to make big decisions. You can research, ponder and then research some more – but at the end of the day the only way to move forward is to act.

Here’s the good news.

There are two types of offers that you can make, and you should consult with your business broker to determine which would work better in your unique situation. One is a Letter Of Intent (LOI) and the other is a Purchase Contract (sometimes just called an Offer). Either way you choose to proceed – you can walk away from the deal if you decide (for whatever reason) that this business isn’t for you. It’s that simple. You will also get ample time to go through the business (financial records, contracts, commercial leases and the like) during a process known as due diligence.

Once you’ve submitted your offer you will have both the time and information you need to make an educated and carefully considered decision about a business.

What happens if you don’t make an offer? Well, nothing. You don’t get a chance to really look at a business because no owner is going to allow a due diligence level investigation of their business if you don’t have ay intention of actually buying it. If you never make offers you end up in a business buyer purgatory with everyone who is just there to kick tires.

If what you really want is to own your own business, you have to start taking those next steps and being decisive. Making an offer tells everyone involved in the deal that you’re a serious buyer and deserve to be treated as such.

Do you really want to buy a business, but making an offer seems like a daunting step? Are there questions about the types of offers you’d like answered? Have you made an offer on a business that you ended up not buying and have an experience to share? Please feel free to leave any questions or comments, we would be happy to help.

Michael Monnot

Buying A Business? How To Make The Tough Decisions

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

Published February 14, 2022

There are a litany of decisions in any business transaction. Some are small. Some are huge. If you’re going to successfully navigate the process and end up at a closing table you’re going to have to be able to make these decisions – without second guessing yourself to the point where you can’t make a decision at all.

Here’s how:

Listen To Reason And Keep Your Emotions Out

Staying reasonable and rational in a highly stressful situation can be tough. It can be easy to let the stress of big decisions overwhelm you and let reason give way to panic – but here’s why you can’t. Choices made while you are in a panic-state can be knee-jerk and purely emotionally driven. The decisions you need to make during a business transaction need to be informed and rational. Go into the process of buying a business knowing the stress will be there – and get the right help. At the very least you should have your own experienced and qualified business broker who can talk you through each step in the process. You can also use their expertise and advice as you think about the decisions you have to make. If you are feeling overwhelmed about a decision or by the sheer number of decisions – talk to your business broker. They know how stressful this process can be and are an objective third party who can help you see your choices from a rational and experienced point of view.

Trust You Gut

You made the decision to start on a path to business ownership, so while the prospect of actually seeing that vison through to completion can be a bit scary at times – you know in your gut it’s the right path for you. With any monumental life change like buying a business cold feet, nerves and the like should be expected. There’s a difference, however, between decision jitters and a gut feeling that something isn’t right. If you feel like something is amiss, talk to your business broker. Any good broker is going to tell you if they think a particular business would be a mistake for you – and they also are going to agree with you if your gut (and not your nerves) are telling you to walk away.

The message here is although the process of buying a business can be stressful, you shouldn’t allow that stress to keep you from following your path to business ownership. Enlist the right help, stay rational and trust your gut.

Have you always wanted to own a business but are nervous about making that dream a reality? Do you have questions about the process required to buy a business? Would you like to know more about the role of a business broker in a transaction? Ask us! Leave us any questions or comments, we would be happy to help.

Michael Monnot

Your Social Media Persona – Why Business Buyers Need To Google Themselves

Published February 7, 2022

You’ve decided you’d like to buy a business, so you start a cursory business search. Listings are purposefully vague (see why here), so after you’ve signed the appropriate NDA you’re finally given the name and address of a potential business.

What’s the first thing you do? That’s easy. You Google it.

In the digital age, this is a natural first step. You want to know everything about this potential business – the good, the bad and the ugly. The internet will absolutely provide all three.

Have you thought about this? If you like a business and want to move forward with conference calls and meetings with the seller (the next step) – they find out who you are too.

Guess what they’re going to do? Google you.

A seller doesn’t just see their business as a building and some inventory. It’s their energy and money, their passion and time spent, it’s employees and customers they consider friends. Simply put, their business is their baby – and they aren’t likely to hand over their baby to someone they don’t feel is up to the job. They want to know that the person who takes the reins is capable, mentally stable and likely to succeed. Does the you that exists online look like that?

Does your online persona appear professional, or do you exist on the internet as someone who you would think twice about hiring as an employee?

It’s easy to get sucked in to the darker side of social media by going on long political rants, engaging in heated comment arguments, by posting funny memes, pictures and videos that even on a good day are problematic. Engaging with friends and strangers through a screen tends to remove the socially acceptable filters that you would normally have during in-person interactions.

While it might be fun to be able to do and say things you normally wouldn’t – it can be a huge problem when people who are deciding if they’d like a professional relationship with you (think business sellers, commercial landlords and the like) find the pseudo-anonymous social media you.

Here’s how to keep your online persona from derailing your chances of buying a business. Look yourself up, before anyone else does.

Throw your name into a search engine and see what comes up. Scroll through your social media feeds and have a look. Pretend you’re an employer researching a potential employee.

If the online you is less than professional, take some time and clean up your feeds. Delete posts, comments or accounts. Remove problematic profile pictures. Add back in professional accounts that show your accomplishments.

You wouldn’t show up to a job interview in dirty pajamas yelling about the news. Treat your online existence the same way.

Are you considering buying a business and haven’t considered how you look on the other side of a Google search? Do you have questions about when and how business sellers find out who you are? Would you like to know more about the process to buy a business? Ask us! Please leave any questions or comments, we would be happy to help.

Michael Monnot