Buyers Articles Archives - Page 33 of 40 - Infinity Business Brokers

Published November 3, 2013

If you are a buyer in the small business market, you will likely have many questions for the seller of a potential business. If you are a business seller, these questions should be something you prepare for as buyers will expect you to have answers.

These are the types of questions that will likely need to be asked and answered, so if you are a buyer – take notes. If you are a seller – try to come up with the answers ahead of time:

Can you describe what your business entails?

When and how did you buy/start the business?

What do you sell/ what kinds of services do you offer?

What do your daily responsibilities look like?

What is something that you don’t like about your business?

Do you like running your business?

How long have you been trying to sell your business?

Are you able to leave the business in the hands of the staff for vacations or family needs?

What do the numbers look like for the past three years?

Who is your largest competitor/ how many competitors are in your area?

Is your industry doing well?

Has the market recently changed?

Iis your share of the market growing or declining?

What do you think can be done to grow the business? Why aren’t you doing those things?

Are any of the members of your staff essential to the business? Is there anyone that needs to be replaced?

What number of employees do you typically keep on payroll?

What kind of non-compete agreement are you willing to make?

Does the business come with any property?

What does your lease look like?

Do you have a good relationship with the landlord?

Are you willing to agree to a training/consulting period after the business is sold?

And the biggest question – Why are you selling?

A caveat for both sides here – if you are a buyer, be respectful with the kinds of questions you ask (personally intrusive questions meant solely to satisfy your curiosity are inappropriate to ask, for example). If you are a seller, be forthcoming with answers to questions about your business. Business transactions are inherently complicated, and in the vast majority of cases both buyer and seller will have to work together during a training period after the business is sold. Keep the relationship amicable, as it will make this transition period more pleasant for all.

Are you interested in buying a business and want to make sure you ask all the right questions? Are you a seller who is looking for help with answering difficult questions about your business? Please feel free to leave a comment or question here, and we will be happy to assist you with whatever you need.

Michael Monnot

Avoiding the Unravelling Deal: The Biggest Deal-Killers and How to Avoid Them – Impatience

Published October 28, 2013

Business brokers from all across the United States were asked what issues caused their deals to fall apart, and instead of a wide range of reasons, the same few came up time and time again. It can be very difficult to get a business deal all the way to the closing table, but knowing ahead of time what types of problems might derail your deal can help you to avoid them. What follows are a series of articles about the major deal-killing culprits and how you can avoid them in your own business transaction

Deal Killer #4: Buyers and Sellers Grow Impatient With The Deal and With Each Other

Business transactions are inherently complicated, and as the complications pile on, one or both parties involved might be inclined to get a bit impatient. If the deal is ever going to make it to the closing table everyone involved needs to take a step back and realize that with time and a little patience the deal will have a chance to go through.

One area where patience can be tested is during the due diligence phase. This is the buyer’s chance to get a really good look at the business and the books, and what tends to happen is the buyer wants increasing varieties and volumes of information as the due diligence phase progresses. This can seriously wear on the seller who is trying to continue running the business during the transaction and may have been unprepared for the additional workload.

Both sides of the deal need to understand that getting a deal closed takes time. The best way to keep impatience from killing your deal is to employ the services of a good business broker. A broker can act as a buffer between the buyer and seller if either (or both) get impatient with one another. A broker can also help to streamline the process as they are experienced with business transactions and most issues that may slow down the deal.

Are you a seller who has grown weary of the selling process? Are you a buyer who is frustrated with a seller? Do you have questions about making the business transaction process go smoothly? Leave us a comment or question here, and we will be happy to assist you with your business transaction questions.

Want to read Deal Killer #1: The Seller Tries to Hide the Skeletons in the Closet? Click Here.

Want to read Deal Killer #2: The Business is Overpriced? Click Here.

Want to read Deal Killer #3: The Buyer, The Seller (Or Both) Take Issues That Arise Personally? Click Here.

Michael Monnot

Avoiding the Unravelling Deal: The Biggest Deal-Killers and How to Avoid Them – Letting Emotions Get In The Way

Published October 28, 2013

Deal Killer #3: The Buyer, The Seller (Or Both) Take Issues That Arise Personally

As a seller, it can be tough to put a price on your business. For many entrepreneurs, their business represents a lifetime of work. Your business is your baby, and when you are trying to sell it can be difficult to separate the emotional ties you have with your business from the very impersonal world of business transactions.

It is important to remember that anyone looking to purchase your business is considering it purely as an investment. They are looking to own a business, and until the deal is closed, it may or may not be your business that they end up with. Be prepared to have buyers ask difficult questions about your financials and about why you do things the way you do. These are not personal attacks, they are just questions from someone who is considering a business investment. It is incredibly important to separate your emotions from the transaction and see all aspects of your business sale in an objective light. To do otherwise will certainly end in a dead deal.

As a buyer, it can be very easy to offend a seller – even if that was not your intention. The business holds no emotional value for you, so you look at it and at the price you are willing to pay for it with a completely different perspective than those who will be on the other side of the closing table. It is important to remember this aspect of business sales if you want to keep a deal moving forward.

For example, don’t make a lowball first offer. You might want to see how deep of a discount you can get on the listing price, but this almost always kills your chances of making a deal. A lowball price insults a seller, most of the time to the point that they will refuse to work with you. If you are serious about the business, make a serious offer and remember that this business probably means a lot to the seller.

For both sides it is important to remember the ultimate goal, which is to get to the closing table. Think and act both objectively and respectfully and you will have a much better chance of getting a deal done.

Are you a buyer who has inadvertently offended a seller who now refuses to work with you? Are you a seller who wants to know how to avoid lowball offers? Leave us a comment or question here, and we will be happy to answer any questions you might have.

Want to read Deal Killer #1: The Seller Tries to Hide the Skeletons in the Closet? Click Here.

Want to read Deal Killer #2: The Business is Overpriced? Click Here.

Want to read Deal Killer #4: Buyers and Sellers Grow Impatient With The Deal and With Each Other? Click Here.

Michael Monnot

Avoiding the Unravelling Deal: The Biggest Deal-Killers and How to Avoid Them – Bad Pricing

Published October 28, 2013

Deal Killer #2: The Business is Overpriced

You may want the world for your business, but the reality is your business will only sell for what buyers are willing to pay.

So what are buyers willing to pay? They are willing to pay for what a seller can prove.

If you are a seller, seek the advice of a qualified and experienced business broker before you settle on a listing price for your business. The business market is a dynamic place and only a business broker will know how to use your financial statements, what you have in inventory and equipment, and what comparable businesses in your area have actually sold for to come up with the most realistic listing price for your business.

Using someone like your regular CPA or your regular attorney to price your business can be a big mistake. Their expertise lies in other areas of your business, so when the time comes to sell, find yourself a good business broker to get you listed on the market.

If you list your business too high, two things will happen. First, buzz on the market that your new listing generated won’t bring in the buyers you may have expected. Your listing will seem overpriced and therefore not worth looking at. Second, your business will stay on the market indefinitely. Do yourself and your business a favor and price it right the first time around.

If you are a buyer, be aware that just because a business is listed for a specific price, that does not mean the business will ultimately sell for that price. Look carefully at any business you are considering to try and figure out how the seller arrived at the price they are asking for. This is another good area to employ the services of a great business broker, as they can help you decide if the business is worth what someone is asking for it.

Are you a seller who wants to price your business right? Are you a buyer who has questions about how to decide if a business is worth what it’s listed for? Leave us a comment or question here, and we will help answer any questions you might have.

Want to read Deal Killer #1: The Seller Tries to Hide the Skeletons in the Closet? Click Here.

Want to read Deal Killer #3: The Buyer, The Seller (Or Both) Take Issues That Arise Personally? Click Here.

Want to read Deal Killer #4: Buyers and Sellers Grow Impatient With The Deal and With Each Other? Click Here.

Michael Monnot

Avoiding the Unravelling Deal: The Biggest Deal-Killers and How to Avoid Them – Hidden Issues

Published October 20, 2013

Business brokers from all across the United States were asked what issues caused their deals to fall apart, and instead of a wide range of reasons, the same few came up time and time again. It can be very difficult to get a business deal all the way to the closing table, but knowing ahead of time what types of problems might derail your deal can help you to avoid them. What follows are a series of articles about the major deal-killing culprits and how you can avoid them in your own business transaction

Deal Killer #1: The Seller Tries to Hide the Skeletons in the Closet

Everyone who is trying to sell their business wants to get the most money possible out of the deal, and for some, the fear of full discovery can lead to some sneaky behavior. Even though every business has some sort of skeleton in the closet, some owners might fear that disclosure will leave their failings as an owner exposed – never a comfortable proposition.

Due diligence occurs when a prospective buyer makes an offer on the business that the seller agrees to. The buyer then gets to peel back the exterior and get a really good look at the business’s books. This part of the selling process is not a problem if you are someone who was upfront about the reality of the business from day one. If you have disclosed everything and all, then there is no reason for concern.

However, if a seller tries to hide a flaw in the business (like a pending lawsuit, like the actual gross earnings, like an outstanding bill with the department of revenue) this flaw will more than likely come to light during the due diligence process.

Big or small, an attempt to hide anything from a buyer leads to mistrust in all aspects of the business, and often ends in a dead deal.

If you are a business seller, do yourself and your business a favor and be upfront from day one. All businesses have issues of one sort or another, and they are often something a buyer could deal with during the transaction – so long as they don’t find out about it on their own.

If you are a buyer, use your due diligence period wisely, as it will be your only chance to find any issues that were not presented to you. Seek professional advice from your business broker or your business transaction CPA if anything seems out of place.

Are you a seller who is afraid that revealing the issues within your business will keep it from selling? Are you a buyer who wants to know what red flags to look for during due diligence? Please leave us a comment or question here, and we will be happy to address any concerns you might have.

Want to read Deal Killer #2: The Business is Overpriced? Click Here.

Want to read Deal Killer #3: The Buyer, The Seller (Or Both) Take Issues That Arise Personally? Click Here.

Want to read Deal Killer #4: Buyers and Sellers Grow Impatient With The Deal and With Each Other? Click Here.

Michael Monnot

Understanding Why Deals Fall Apart

Published October 15, 2013

The buyer and seller reach agreement on the sale of the business, only to have it fall apart.

There are reasons this happens, and, once understood, many of the worst deal-smashers can be avoided. Understanding is the key word. Both the buyer and the seller must develop an awareness of what the sale involves–and such an awareness should include facing potential problems before they swell into floodwaters and “sink” the sale.

What keeps a sale from closing successfully? In a survey of business brokers across the United States, similar reasons were cited so often that a pattern of causality began to emerge. The following is a compilation of situations and factors affecting the sale of a business.

The Seller Fails To Reveal Problems

When a seller is not up-front about problems of the business, this does not mean the problems will go away. They are bound to turn up later, usually sometime after a tentative agreement has been reached. The buyer then gets cold feet–hardly anyone in this situation likes surprises–and the deal promptly falls apart. Even though this may seem a tall order, sellers must be as open about the minuses of their business as they are about the pluses. Again and again, business brokers surveyed said: “We can handle most problems… if we know about them at the start of the selling process.”

The Buyer Has Second Thoughts About the Price

In some cases, the buyer agrees on a price, only to discover that the business will not, in his or her opinion, support that price. Whether this “discovery” is based on gut reaction or a second look at the figures, it impacts seriously on the transaction at hand. The deal is in serious jeopardy when the seller wants more than the buyer feels the business is worth. It is of prime importance that the business be fairly priced. Once that price has been established, the documentation must support the seller’s claims so that buyers can see the “real” facts for themselves.

Both the Buyer and the Seller Grow Impatient

During the course of the selling process, it’s easy–in the case of both parties–for impatience to set in. Buyers continue to want increasing varieties and volumes of information, and sellers grow weary of it all. Both sides need to understand that the closing process takes time. However, it shouldn’t take so much time that the deal is endangered. It is important that both parties, if they are using outside professionals, should use only those knowledgeable in the business closing process. Most are not. A business broker is aware of most of the competent outside professionals in a given business area, and these should be given strong consideration in putting together the “team.” Seller and buyer may be inclined to use an attorney or accountant with whom they are familiar, but these people may not have the experience to bring the sale to a successful conclusion.

The Buyer and the Seller Are Not (Never Were) in Agreement

How does this situation happen? Unfortunately, there are business sale transactions wherein the buyer and the seller realize belatedly that they have not been in agreement all along–they just thought they were. Cases of communications failure are often fatal to the successful closing. A professional business broker is skilled in making sure that both sides know exactly what the deal entails, and can reduce the chance that such misunderstandings will occur.

The Seller Doesn’t Really Want To Sell

In all too many instances, the seller does not really want to sell the business. The idea had sounded so good at the outset, but now that things have come down to the wire, the fire to sell has all but gone out. Selling a business has many emotional ramifications; a business often represents the seller’s life work. Therefore, it is key that prospective sellers make a firm decision to sell prior to going to market with the business. If there are doubts, these should quelled or resolved.

Some sellers enter the marketplace just to test the waters; to see if they could get their “price,” should they ever get really serious. This type of seller is the bane of business brokers and buyers alike. Business brokers generally can tell when they encounter the casual (as opposed to serious) category of seller. However, an inexperienced buyer may not recognize the difference until it’s too late. Most business brokers will agree that a willing seller is a good seller.

Or…the Buyer Doesn’t Really Want To Buy

What’s true for the mixed-emotion seller can be turned right around and applied to the buyer as well. Buyers can enter the sale process full of excitement and optimism, and then begin to drag their feet as they draw closer to the “altar.” This is especially true today, with many displaced corporate executives entering the market. Buying and owning a business is still the American dream–and for many it becomes a profitable reality. However, the entrepreneurial reality also includes risk, a lot of hard work, and long intense hours. Sometimes this is too much reality for a prospective buyer to handle.

And None of the Above

The situations detailed above are the main reasons why deals fall apart. However, there can be problems beyond anyone’s control, such as Acts of God, and unforeseen environmental problems. However, many potential deal-breakers can be handled or dealt with prior to the marketing of the business, to help ensure that the sale will close successfully.

A Final Note

Remember these three components in working toward the success of the business sale:

Good chemistry between the parties involved.
A mutual understanding of the agreement.
A mutual understanding of the emotions of both buyer and seller.

Michael Monnot

Where Have All the Boomers Gone? Is the Time Approaching for the Greatest Generation to Retire From Small Business Ownership?

Published October 14, 2013

The business market may have expected the wave a decade ago, but the state of the economy left many wondering when the market would begin to see the mass-retirement of baby boomers from small business ownership.

The high point of the bubble in 2007 kept many boomers who may have thought about retirement in the game, trying to ride the positive wave for as long as possible to increase the money they would be able to pull out when they retired. Sadly, when the bubble burst many older small business owners either lost their businesses entirely or had to stick it out as values plummeted.

Happily, the market is making a slow turn around, and now the time is fast approaching when aging boomers will have to make the decision about what to do with their business when they decide to step away. The decision of when to sell can be an incredibly difficult one, but the right time may be sooner rather than later.

Many took advantage of the last gasp of capital gains breaks, deciding to sell at the end of 2012. For those that stayed in the game, an important fact to consider is the volume of businesses that are about to appear on the market. According to the U.S. Small Business Administration about 52% of the self employed in 2011 were age 45 to 65. This means there may be a huge number of small business owners within the range of retirement, and when they all decide that the time has come to sell the market will see a surge in new business listings.

This may be great news for those interested in purchasing a business, but for sellers the news may not be so great. It may be advantageous to be a business seller on the beginning of the wave of boomer-owned businesses that hit the market than one at the peak or the trailing end, as a saturation of any kind in any market is rarely a good thing.

Are you a member of the greatest generation who has considered selling your business so that you can retire? Do you want to get your business on the market while demand for new businesses is high? Please feel free to leave us a comment or question here, and we will be happy to help you get ready for retirement from small business ownership.

Michael Monnot

The Benefits of Seller Financing: Business Buyers & Business Sellers

Published August 11, 2013

Seller financing, sometimes referred to as owner financing, is common in the small business market.

Why?

It is a great option for all parties involved.

For Buyers:

The absence of extra costs and fees make it a better deal than traditional lending for business buyers. When using traditional lending, like a bank loan, there are higher costs. Banks tack on origination fees, document fees and fees for credit checks.

Also, you will likely get a more favorable interest rate than you would from traditional lending institutions when borrowing from a business seller. You also avoid any penalties for paying off your loan early, like you might encounter from a bank. Most sellers are happy to get their money back faster than expected.

For Sellers:

By offering seller financing, a business seller is making their business very appealing to buyers. When you offer to keep some skin in the game, you are telling potential buyers that you have faith in the long term success of the business. If you didn’t, you wouldn’t get paid. It also tells buyers that you are ready and willing to help properly train them and help ensure their own success.

Owner financing also brings in more prospective buyers when you list your business for sale. Although they exist, all-cash buyers are typically few and far between, and traditional financing can be very hard to get for the purchase of a small business. By offering to finance part of the purchase price, you are opening your business to a greater pool of potential buyers, thereby increasing the likelihood that your business will sell.

Do you have questions or concerns about seller financing? Please feel free to leave a comment or question here, and we will get you the answers you need.

Michael Monnot

Business Buyer’s Mistakes: Avoid These Blunders

Posted in Buyers Articles

Published August 7, 2013

If you are new to business ownership, or are considering buying a business for the first time, it is important that you understand the ins and outs of the business buying process; otherwise you might end up making a very costly mistake. Here are some typical blunders that inexperienced entrepreneurs make:

Using your own name for the business:

You should not put any kind of legal contract or business agreement in your own name, nor should you make the business name the same as your legal name. When you purchase a business, you will need to set up a LLC or corporation to protect your personal assets from litigation related to the operation of your business.

Buying a business you know nothing about:

First-time business ownership is hard enough without having to start at ground zero. If you have always wanted to buy a restaurant, but have never worked in one, it would be a big mistake to choose that industry. Choose a business in an area where you have experience because as the owner of a business, you need to know what the business needs.

Not doing your homework:

Why is the business for sale? Is it just because the owner is retiring, or are they jumping off a sinking ship? You will have the due diligence phase to determine what, if any, the problems are, and then you will have the opportunity to amend your offer or walk away from the deal all together. This is a critically important step, as you don’t want to discover problems after the business is already yours.

Trying to rebrand too soon:

Unless you are buying a business with a horrible reputation, a new owner should tread carefully with regards to changing the business. You bought the business because it was an established company with a good reputation, and you don’t want to drive away customers familiar with the brand by immediately dismantling everything they know about the business. The established image may have more to do with the bottom line than you know, so make changes slowly.

Running out of money:

It may take several months to get a business transitioning to a new owner profitable again, so leave yourself enough operating capital to keep the doors open. Many new owners walk into a functioning business and immediately spend far too much on unproven improvements, digging themselves a very deep financial hole in the process.

Not understanding the importance of marketing:

You may have bought an already established business, but that doesn’t mean that you can forgo marketing and promoting the business. Many established businesses already have a customer base, but keeping those customers coming back and bringing new ones in is a responsibility that now falls to you. Advertising needs to be a top priority as the new owner.

The most important thing you can do as someone who wants to become a business owner is find the right help. If this is a process you’ve never gone through before, find a good business broker to help you along the way. Having assistance through this process will save you from making many of the mistakes that first-time business buyers make, mistakes that can be very costly.

Are you thinking about buying a business for the first time, but want to avoid the blunders listed above? Do you have additional questions about the business buying process? Contact us or leave a question here and we will be happy to assist you on the road to business ownership.

Michael Monnot

Buying a Business: What Future Entrepreneurs Need to Know

Posted in Buyers Articles

Published July 25, 2013

When the title entrepreneur comes to mind, it often conjures thoughts of a person who came up with an inspired idea and built a successful and thriving business from the ground up. While this may be the path for a few very driven individuals, the path for most entrepreneurs begins quite differently, with the purchase of an existing business. This can be a fantastic entre into business ownership because it skips all the disadvantages a start-up will encounter, like establishing a customer base and building cash flow.

Skip the Build-Out and Buy Existing

Typically, buying a business is a safer bet than building one from scratch. You get to take over as owner of an already built-out location with trained employees and a proven set of operating procedures.

It is not, however, a fool-proof way to enter the world of business ownership. You need to choose a business that is profitable, or one that has easily-remedied issues that will make it profitable quickly (like customer service issues that could be handled by replacing some of the staff). You need to choose a business that has room for growth, and if it is a retail business, one with inventory that customers still want.

Were You Meant For Each Other?

When you have made the decision to buy a business your next step is choosing the type of business you will buy. Be very careful with this step because it is where many new entrepreneurs make a huge mistake.

The mistake is buying a business you know absolutely nothing about. If you are someone who has enjoyed the bar-scene for a long time, but you have never spent so much as a minute working in the restaurant industry, then buying a bar should be out of the question.

Look in industries where you have some knowledge or experience, as this familiarity will save you from complete disaster. Taking over a business for the first time is hard enough; you don’t want to add starting from scratch to the equation.

Who Will Save Me?

The smartest step any budding entrepreneur can make, or anyone looking to buy a business for that matter, is to hire an experienced business broker. A broker will be a great asset, as they can help you find businesses that are right for you, be a buffer during the negotiations between you and the seller, and they will be invaluable with assisting you with everything from licenses to red tape.

Once you have a broker and an idea of what type of business you are looking for, you will be well on your way to finding a great existing business!

Do you have a business type in mind, and are looking for help with finding the right business for you? Please feel free to leave us a comment or question here, and we will be happy to help you on your journey to business ownership.

Michael Monnot