Business Broker Why & How Archives - Page 2 of 8

Does Your Broker Care About Qualified And Informed Buyers? They Should

Posted in Business Broker Why & How, Buyers Articles, Sellers Articles

Published February 6, 2023

The process of buying and selling businesses can be a bit frustrating. There are rules and procedures in place that ensure the for-sale status and proprietary information of a business on the market only ends up in the hands of the people it should. Those rules and procedures rely on vetting potential buyers and then having buyers who are qualified sign the appropriate nondisclosure agreements (NDAs).

Here’s how it typically should look. A buyer calls a business broker and has a conversation about their goals for business ownership, the capital they have ready to invest and their past experience. The broker then uses that information to put together a few listings that look like they might match. If a listing or two catches the buyer’s eye, they sign the NDA for that business in order to find out more (like the location, basic financials, etc.). If they like what they see, they will then coordinate a conference call or face to face meeting with the business seller to ask questions. After a few of these meetings/calls a site visit might be scheduled before or after hours when the staff and customers won’t be around. If a buyer is interested they can submit a purchase offer and negotiations can begin.

Notice something? The sale of a business is complicated, requires a lot of steps and a lot of time. If the brokers involved are doing their job the buyers who enter this complex and time consuming process are both aware of what they’re looking for and actually able to buy the business in the end.

Here’s what you don’t want. A broker who will send you dozens of NDAs to sign without ever speaking to you, meaning you end up wasting your time looking at businesses that would never meet your goals. A broker who will bring a parade buyers through your business for site visits that could never afford to actually buy your business. A broker who will entertain the whims of a buyer who doesn’t have the practical experience necessary to qualify for a SBA loan or that your commercial landlord would immediately reject.

A broker who asks the right questions keeps a deal on track and keeps from wasting everyone’s time. You want a broker who actually talks to buyers. You want to be (if you’re a buyer) and want to work with (if you’re a seller) a buyer who understands the process, knows what businesses will actually fit with their goals and has the money necessary to get a deal to closing.

The message here is you need to ask any broker you work with questions and you need to keep an eye out for red flags. If you’re a buyer a broker should be asking you LOTS of questions before they send you any NDA. If you’re a seller your broker should only be bringing you buyers who are qualified and would be successful future owners of your business.

Are you looking at businesses to buy and haven’t had a broker yet who asked you a single question? Are you considering selling your business and want to know what type of buyer would be a good for your business? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

Is My Business Broker A “Good” One? What You Shouldn’t Pay For

Posted in Business Broker Why & How, Buyers Articles, Sellers Articles

Published December 12, 2022

Like any industry, there are good business brokers and there are those who should find another way to make a living. Determining if the broker you’ve chosen falls into the “good” category might seem tough, but one way you can decide is by looking at the things your broker is willing to do without you having to pay extra for that service.

Most brokers earn a commission at closing, and the amount is based on a percentage of the sale price. If you are a seller, this percentage will be negotiated at the time of listing and will be a part of the listing agreement.

Beware the broker who will forgo the listing agreement or who will drastically cut their commission percentage just to get your listing. A great broker will stand firm of their typical percentage because they know how much work they are putting into selling your business. A desperate broker who can’t get and keep regular business will be willing to do anything to get you to sign on the bottom line. Also beware of a broker who charges extra fees for something as basic as your marketing package or advertising costs. These basic elements necessary to sell your business come out of the commission your broker makes at the time of the sale, not before.

For buyers, your broker gets a chunk of the money you pay for the business, so technically you are paying them even though you don’t have an agreement. Beware the broker who forces you to pay up front for their services. This shows a lack of confidence in their ability to find you a business and get you all the way through to closing. A great broker is not going to demand a retainer, nor are they going to charge you extra for help with the things every buyer needs – like basic assistance with licensing. If you are getting billed for basic services, then you probably need a different broker.

The key here is to watch for those brokers who put the amount of money they make in front of the reason they do what they do for a living. A great broker likes their job. They like helping the small business community grow, and they live for the chase and the thrill of negotiations. They don’t live to nickel and dime their clients. They get the vast majority of their listings through the referrals by former clients and members of their local small business community. They go to bat for their clients and are willing to help.

If the things we’ve named for a great broker don’t sound anything like the broker you are currently working with – it might be time for a change. When you initially interview brokers – ask about their referral rate, what kinds of fees they charge (there shouldn’t be any besides the commission) and what kind of percentage they take for commissions. The answers to these questions will speak volumes about the motivations of your broker and give you a good idea of where they fall on the great vs. not-so-great broker divide.

Have you had a not-so-great broker experience? Do you have questions about our referral rates and typical commission percentages? Ask us! Leave a comment or question, and we would be happy to help.

Michael Monnot

Buying A Business? Why Research & Questions Should Be Your Top Priority

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

Published April 25, 2022

We get it. Once you’ve decided that you are ready to make the leap and buy a business it can be hard to keep from going directly to the shopping phase. It’s fun to look at business listings and envision yourself as the owner. Guess what? Shopping for businesses in this way is unproductive and ultimately won’t get you what you’re hoping for from business ownership.

Why?

Any business, large or small, can be condensed down to one major thing. A business is cash flow. You are providing goods or services that you pay for and then your customers pay you. It’s the money in and money out that makes a business successful, and hopefully you’re making more than you’re spending.

If a business is essentially just cash flow it really doesn’t matter what color the walls are. Looking at pictures of businesses on the internet isn’t telling you much of the story. Neither is perusing vague P&L statements.

What you really need to know about a business is does it generate (or have the potential to generate) the amount of cash flow I need to live day to day as the owner – and is it possible for me to be successful in this industry.

How do you figure that out? Research and questions.

Research the areas where you’d like your business to be. Can you afford to live there? How much would you need to make to have that be possible? Will the area work for you and your family? If you’d love to live on the beach, but your target area has zero schools for your kids you might need to redirect your target area.

Research the different industry sectors possible in that area. Do you have any practical experience or education that would make a particular industry better for you than another? Will the industries available in your target area match with your skills? If you’ve always wanted to own a big restaurant but have never spent a single day in the restaurant industry, then looking at food service industry business is likely a mistake.

Once you’ve done some research, start asking questions. Have a conversation with an experienced and qualified business broker about the areas you’re considering, your practical experience and education, your goals for business ownership and the amount of capital you have to invest. Ask lots of questions – about the area, about the industries that do well in that area, about what types of businesses would both fit with your experience and with what you hope to get out of owning your own business.

Notice something? So far we haven’t said “look at listings” because it isn’t helpful until you know where you want to be and what you need to be successful.

Don’t waste a ton of time scouring the internet for your future business. Do some research and then get in touch with a business broker.

Do you have questions about the process to buy a business? Would you like to know what types of businesses would match your practical experience? 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

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

Have The Right Help? Why An Experienced Broker Won’t Show You Every Business In Town

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

Published December 27, 2021

You’ve just entered the business market with the intent of buying yourself a small business, and you are shopping around for a business broker to help you.

There are many factors that separate the good brokers from the bad – but one of the big ones is experience.

Rookie brokers make lots of mistakes, and if you’ve hitched yourself to their wagon for your transaction then you get to live those mistakes right along with them.

As experienced brokers, it can be very frustrating to try and work with these newbies. It becomes increasingly difficult when they are trying their hand at the business transaction process alone and without any guidance (or if they have an experienced broker they work for who has given them little to no training).

One of the major ways this lack of experience shows through? Too many showings.

What do we mean by too many showings?

If you’ve ever bought a house, you know that going to see a plethora of homes is part of the game – especially in a fast-moving market where a house might have multiple offers the first day it lists. This is not, however, how business sales works – so newbie business brokers (especially those fresh out of the real estate industry) will sometimes try to play the same game by attempting to line up a litany of businesses for their clients to see. It doesn’t work.

First of all, when you are buying a business, you are buying an existing business – one that is open and running with staff and customers. The importance of confidentiality means that the staff and customers can’t know the business is for sale. Therefore, a business seller can’t have a parade of semi-curious buyers waltzing through the front door on a regular basis – it would make confidentiality impossible.

If done properly, the process to go see/tour a business is much more extensive:

It starts by having a conversation with your business broker about what you are looking for in a business and what your goals are. You will also talk about how much capital you have to invest in a business, and your broker will then take that information and find you a number of listings to look at that will be within your budget and meet your entrepreneurial goals. Out of that initial batch of potential businesses, you will typically be asked to narrow down the choices to just a few – think two or three – that peak your interest. You will then sign non-disclosure agreements for those listings in order to receive the marketing package, complete with the name and physical location of the business. After thoroughly reviewing the marketing materials for your few choices, you will probably prefer one business over the others. Your broker will help you form a list of additional questions you have for the sellers, and you will be given an opportunity to ask those questions during a conference call including the sellers, the brokers involved and you. After all of those steps have passed and you are still very interested in the business, your broker will set up a walk-through of the physical location of the business either before or after business hours when the staff and customers are gone.

What you can’t do in this process is decide that you want to spend a few days touring businesses and line up 5, 10 or more “showings” with your broker. No experienced broker worth their salt is going to waste their seller’s time by trying to coordinate a visit when the buyer hasn’t even bothered to narrow down their choices or ask any good questions. It’s just not going to happen. They’re also not going to put the confidentiality of the business at risk by having too many unfamiliar people coming to the business to meet with the seller during business hours as the staff will know something is up.

If you ask for this type of multi-tour approach and your broker says “Sure!”, beware that you probably have a rookie on your hands. The experienced brokers on the other side of the table aren’t going to play along, and you will be stuck seeing only the businesses listed by fellow rookie brokers.

If you are serious about buying, get yourself an experienced broker and go through the proper steps. You will end up only seeing the businesses that are right for you instead of wasting your own time looking at businesses that don’t fit the bill.

Are you a first-time buyer with more questions about the business buying process? Have you had an experience with a rookie broker that you’d like to share? Please feel free to leave comments or questions and we would be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

3 Tips To Start Your Business Search

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

Published December 6, 2021

If you are thinking about taking the entrepreneurial plunge by buying a business, you may be wondering where to start. Who should you talk to? What should you look for? How do you begin a search?

Here are 3 tips to get your business search going and put you on the path to small business ownership:

Get In Touch With A Business Broker

Many new buyers think that the services of business brokers are only for sellers, but nothing could be farther from the truth. A good local broker can help steer you in the right direction – both to the right industry and businesses that you can successfully afford.

In your first conversation with a good broker you will likely discuss what your goals are for business ownership, what capital you have readily available to invest in a small business, the industries where you have practical experience and the businesses you are considering. In some cases a buyer who is considering one industry may have more success meeting their goals for business ownership (like setting your own schedule or employing members of your family) by buying a business in an industry they hadn’t even thought of.

Do Some Self Searching

Owning a small business is a life-encompassing affair, and before you decide what type of business would be right for you, you need to think about what you want to get out of business ownership. Have you always dreamed of owning your own bar, but you’ve never worked so much as one day in the restaurant industry? Buying a business and becoming an owner overnight can come with a steep learning curve – you don’t want to add learning a whole new industry to the mix.

You also need to consider what you want your life as a business owner to look like. If part of your reason for transitioning to an entrepreneur is to give yourself more time with your kids – then owning a business like a bar where you will work seven days a week from 3pm to 3am probably isn’t going to leave a lot of time for coaching their little league team.

Do An Exploratory Search

Many prospective business buyers have a general idea in their minds of the type of business they would like to own, but after a cursory search they discover that there are business opportunities out there they’ve never even heard of or considered. Do a cursory search of the businesses available in the geographical areas that interest you and you may be surprised what you find. You can start your cursory search by clicking here, and then ask us about any interesting businesses you find by contacting us today.

If you are thinking about joining the world of small business owners – do some soul searching, talk to a good broker and do a little exploratory searching on your own. By opening the field of available and potential businesses you will have a greater chance of finding the perfect business for you.

Have you thought about buying a business but aren’t sure where to start? Do you have questions about how the business buying process works? Ask us! Please feel free to leave any questions or comments and we would be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

The One Broker Approach: Why Having Your Own Broker Is Key To A Successful Business Purchase

Posted in Business Broker Why & How, Buyers Articles

Published November 15, 2021

We’ll start this one by saying as a caveat that if you end up with a dreadful broker who never returns your phone calls, doesn’t show up to scheduled meetings on a regular basis and is all around just bad – by all means, find a new broker.

Caveat aside, many business buyers come to the business-for-sale marketplace and try to play the field, and this never ends up working in their favor.

What do we mean by playing the field? If you’ve emailed 30 brokers in a small local area to request information on potential businesses, then you are doing yourself and your prospects for business ownership a big disservice.

Why?

Your business search needs to be focused in order to be successful, and in order to have a focused business search you need to have a relationship with a good broker.

This relationship should start with a conversation about several very important things – things that won’t come across if all you are doing is shooting email requests to everyone in the area.

Your initial conversation with a broker might start out as an inquiry into one specific business, but it shouldn’t stay that way for long. A good broker is going to ask you questions that will let them know what direction you want business ownership to take and then help narrow your focus to just those businesses that would fit with your goals.

What should a broker be asking you?

They should ask about what your goals for business ownership are. If what you are hoping to achieve is a very flexible schedule so you can spend more time with your kids, then some businesses are definitely out of the question. If schedule isn’t a priority, but making as much money as possible is – then a very different business would be for you.

They should be asking what your passions are. Entrepreneurship is no picnic. It can be an enormous amount of work, so you need to be doing something that you can be driven and passionate about or you will end up miserable.

They should ask about your experience. If you’ve never worked so much as a single shift in the restaurant industry, then it would be a terrible idea to buy a bar or restaurant. Business ownership is tough, especially if you are brand new to entrepreneurship. You don’t want to add learning an entirely new industry on top of it – you will be setting yourself up for failure.

They should be asking about your finances. You might think you have enough money to buy a particular business, but the reality of buying is that you need far more money than just enough to cover the listing price. You need enough to write the closing check, enough for the deposits for your utilities and lease, enough to buy new inventory, enough for licensing fees, enough for the first few rounds of payroll – the list goes on. A good broker doesn’t want to set you up for failure, so knowing your financial situation will allow them to find you businesses you can actually afford.

The point here is only by having a relationship with a single broker (who knows these very key things about you and about your business ownership goals) can you have any hope of finding the right business.

Approach you search for businesses by searching for a good broker first – then you can count on that relationship to bring you the businesses you should see.

Have you sent a ton of email requests but haven’t actually had a conversation with a broker yet? Do you want to know more about why a relationship with a good broker is so important for your success in purchasing a business? Ask us! Please feel free to leave any questions or comments, and we would be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

Selling? The Questions Your Broker Should Be Asking Buyers

Posted in Business Broker Why & How, Sellers Articles

Published October 21, 2021

If you are ready to sell your business, then you might already know the importance of confidentiality during a business sale (if you don’t, read this now).

Keeping the for-sale status of your business as need-to-know-only information will be pivotal to a successful sale, and the best person to help you maintain confidentiality is an experienced and qualified business broker.

Notice that we said experienced and qualified. Like any industry there are brokers who know what they’re doing and those who could care less. You don’t want the latter on your team. You don’t want a broker who responds to every form or email inquiry about your business with an automatic nondisclosure agreement (NDA) – without any idea of who the person is that’s signing it. Allowing dozens and dozens of NDAs on your business opens you up to a myriad of problems.

A prospective buyer should be answering some very important questions before they’re just handed the NDA. If anyone who tries can get access to your business information, the likelihood of maintaining confidentiality (as well as the likelihood of finding the right buyer) will probably be small.

The initial vetting of prospective buyers is critically important, and if your broker knows what they’re doing they will be asking questions like these:

Do they have any practical experience with a business like yours?

You’ve worked hard to make your business what it is today, so you aren’t likely to hand the keys to someone who is destined to immediately drive your business into the ground. Potential buyers need to have some sort of practical experience, training or education in your industry so they don’t have to add learning an entirely new industry to the already steep learning curve of taking over an existing business. This is also very important if you lease your business location, as a commercial landlord is unlikely to transfer a lease to someone who would have no idea what they’re doing. It’s a safer bet for the landlord to have you stay on as the owner and keep paying the rent.

Do they have the financial means to actually buy your business?

The business market is full of buyers who think they can afford businesses they definitely can’t – incorrectly assuming they will be able to finance 80-90% of a sale. In most business deals where financing is involved – be it SBA loans, seller financing or a more traditional loan – a buyer will need to come to the table with a sizeable down payment. A good broker will have a very serious discussion with a prospective buyer about how much cash they actually have available to buy a business, how much financing they would actually be able to get and then only disclose to that buyer businesses they can afford.

Is this buyer who they say they are?

One of the ways confidentiality can be breached is by letting the wrong person sign the NDA for your business. Think a current or former employee who is looking to confirm a rumor or a competitor looking to move in on your niche. Your broker should ask you to come up with a list of people who can’t know the business is for sale, and then verify someone’s identity before handing them the NDA to sign. Good brokers ask a lot of questions, require some personally identifying information and then wait to verify that information before disclosing your business.

The point here is in order to reach a closing table successfully, you need to make sure you have the right help. Ask your broker what they do to vet potential buyers. Are they asking questions? Or do they disclose to anyone who asks?

Are you getting ready to sell your business and want to know more about why confidentiality is important? Would you like to know more about our process to vet buyers? Ask us! Please feel free to leave any questions or comments and we would be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242