Buyers Articles Archives - Page 4 of 40 - Infinity Business Brokers

Business Buyers: Should You Put In A Backup Offer?

Posted in Buyers Articles

Published September 25, 2023

It can be very, very frustrating. You find a business you really like but discover that it is already under contract with another buyer. It can be tempting to give up and move on to the next business on your list, but there’s a savvy strategy that can significantly increase your chances of acquiring that dream business. Put in a backup offer.

Why?

It secures your position in line.

One of the primary reasons for submitting a backup offer is to secure a position in line if the primary contract falls through. In the unpredictable world of business transactions, deals can and do fall apart for various reasons – such as financing issues or disagreements over terms. By having a backup offer in place, you position yourself as the next in line to acquire the business, giving you a valuable advantage.

It shows how serious you are about the business.

Submitting a backup offer demonstrates your genuine interest and seriousness as a buyer. Sellers often appreciate proactive buyers who are willing to invest time and effort into the deal. This can create a positive impression and potentially influence the seller to consider your offer more favorably in the event that the primary contract fails.

It might give you a leg up in future negotiations.

In some cases, the primary contract may fall apart due to negotiation conflicts or disputes over terms. When you have a backup offer ready, it can provide leverage for renegotiating terms with the seller. Knowing that another viable offer is waiting in the wings may encourage the seller to reconsider certain terms, potentially in your favor.

An important note: submitting a backup offer typically does not require a financial commitment (like a deposit). You can, however, add a deposit to you backup offer in order to strengthen your position – just ask your business broker to add a fully refundable deposit clause in the event your backup offer is not needed. This means you can pursue other opportunities while keeping your backup offer as a safety net.

In the competitive world of business transactions deals fall apart every day. Putting in a backup offer when you really like a business that is already under contract can be a savvy move that pays off in various ways. It positions you as a serious buyer and can provide negotiation leverage. While it may not guarantee success, it significantly increases your chances of getting your hands on the business you really want if the primary deal falls through. Consider the strategic advantage of the backup offer – it just might be the key to unlocking your dream business.

Have you been looking at businesses and have only liked those already under contract? Would you like to know more about how to put together a backup offer? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

Balancing Love + Business: How To Buy A Business With Your Spouse

Posted in Buyers Articles

Published September 18, 2023

Buying a business comes with its own set of challenges and rewards. When you add the dynamic of doing it with your spouse, it can become an even more intricate journey. While the idea of working together and building a business as a couple can be enticing, it’s essential to consider everything that will ensure the success of both your professional and personal lives.

Here’s some thoughts to consider:

Before diving into a business venture together, it’s crucial to have a shared vision and clear objectives. Discuss your long-term goals, such as the type of business you want, the level of involvement you both feel comfortable with and your financial expectations. Ensure your aspirations align to avoid potential conflicts down the road.

Establishing well-defined roles and responsibilities is vital to prevent confusion and conflicts. Determine who will handle specific aspects of the business – such as finances, operations, marketing, etc. Clear delineation of roles helps streamline decision-making and avoids arguments.

Consult with legal and financial professionals to determine the most suitable structure for your business. Options include forming a partnership, LLC or corporation. Each has its own tax and legal implications, and making the right choice can help protect your personal assets outside of the business.

Effective communication is essential in any business partnership, but even more so when your spouse is your business partner. Foster open and honest communication channels, and establish a process for resolving conflicts or disagreements. Remember that it’s okay to have differing opinions, but finding compromise is key.

Talk about how you’ll pay for the business. Are you using personal savings, seeking investors or taking out loans? Ensure both partners are on the same page regarding financial contributions and expectations. Be realistic about the financial commitment required to purchase a business – such as the extra capital needed to secure a commercial lease, pay for payroll, license/permit fees and the like.

Maintaining a healthy work-life balance can be challenging when you’re both deeply involved in the business. Set boundaries for work hours and designate specific areas for discussing business matters. Make time for personal and family activities to prevent burnout and maintain a strong relationship outside of work.

It’s essential to plan for the future, including scenarios where you may decide to sell the business or if unforeseen circumstances arise. Discuss and create an exit strategy that outlines how you’ll handle a business sale, succession planning or dissolution – and most importantly ensure it’s legally documented to keep it from becoming a massive issue if your personal relationship falls apart.

Buying a business with your spouse can be a rewarding because it allows you to share both professional and personal aspects of your life. However, it comes with its own set of complexities and challenges. Balancing love and business is possible with the right planning, communication and commitment to your shared vision.

Are you considering buying a business with your spouse but hadn’t yet considered everything we’ve listed here? Do you have questions about how to set up a well-defined exit strategy? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

Buyer + Seller Beware: Make Sure Your Business Broker Is Really A Broker

Posted in Buyers Articles, Sellers Articles

Published September 11, 2023

Selling or buying a business is a significant decision. It requires careful consideration and expertise. Many entrepreneurs and business owners turn to business brokers to navigate this complex process. However, not all business brokers are created equal, and one critical factor to consider is whether the broker is really a broker.

What do we mean by that?

Many, many “brokers” aren’t business brokers at all. They’re real estate agents, attorneys – even dentists who “help” people buy and sell businesses on the side. You do not want a fly-by-night, part-time broker. You want an experienced and qualified full-time professional. Using someone who isn’t actually a business broker to help you buy or sell a business would be like going to your CPA to fix a toothache.

Why?

Part-time business brokers, as the name suggests, have other commitments outside of brokering deals. This limited availability can lead to slow response times and delayed communication. When you’re in the midst of a business transaction, time is of the essence and delays can be costly. A full-time broker is more likely to prioritize your deal and provide the attention it deserves.

Business transactions involve a multitude of legal, financial and operational complexities. A part-time business broker may not have the same depth of knowledge, experience or industry connections as their full-time counterparts. Selling or buying a business often requires specialized expertise, which a part-time broker may not be able to provide.

The business landscape is constantly evolving, and staying updated with industry trends, regulations and market conditions is crucial. Part-time brokers may struggle to keep pace with these changes due to their limited exposure to the market. A full-time broker is more likely to have their finger on the pulse of the industry, giving you a better understanding of current market dynamics.

One of the key benefits of working with a business broker is their network of potential buyers or sellers. A full-time broker has more time and resources to build and maintain a broad and diverse network. This extensive network can lead to more opportunities and a higher likelihood of finding the right buyer or seller for your business.

Successful business transactions often require substantial resources, including marketing, legal support and financial analysis. Part-time brokers may not have the resources or connections needed to provide these services adequately. In contrast, full-time brokers are more likely to have established relationships with professionals who can support the transaction process.

While part-time business brokers may be well-intentioned – their limitations in terms of availability, expertise and resources can pose significant risks when it comes to selling or buying a business. Work with a full-time, experienced and qualified business broker who can provide the dedication and expertise needed to achieve a successful outcome.

Are you looking at buying or selling a business and didn’t know that some “business brokers” aren’t business brokers at all? Would you like to know more about how we (as full time, experienced and qualified brokers) can better assist you through the transaction process? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

Keeping Appointments When Buying A Business – Why It’s So Important

Published September 4, 2023

It might seem insignificant. You had an appointment with a broker for a call or you’re supposed to do a walk through of the business after coordinating with the brokers and the seller. What’s the harm if you let everyone know you can’t make it or if you forget and don’t show?

Keeping appointments is very, very important when you are trying to buy a business. It can make or break your journey to becoming a business owner.

Why?

When you buy someone’s business you aren’t buying a simple physical object. You’re buying someone’s blood, sweat and tears. Most business sellers care a lot about who buys their business because they want the business to continue as a success. They want their employees to be happy and keep their jobs. They want the brand they started to continue in the community.

A business buyer can’t just write a check. You need to have an amicable, professional relationship with the seller. You need them to trust you with their business. You need them to train you when you first take over. You need them to negotiate with you.

This is why it’s so crucial to keep all of your appointments in the business buying process.

Consider these thoughts:

Showing up when you said you would demonstrates commitment and professionalism.

When you’re in the process of buying a business, keeping appointments demonstrates your level of commitment and professionalism to the seller, the brokers, your prospective future commercial landlord and the like. It shows that you value their time and take the deal seriously. Consistently showing up (and showing up on time) for meetings and appointments establishes a positive impression, making it more likely that everyone involved will view you as a reliable and trustworthy part of the process.

Keeping appointments helps you build trust.

Buying a business involves a lot of negotiation and collaboration. Keeping appointments allows you to build trust and rapport with the seller. Trust is vital in a successful business transaction. It can lead to more open communication, smoother negotiations and a greater likelihood of finding solutions when inevitable problems arise.

Respecting everyone’s schedule and time can keep the deal on track.

Time is often of the essence in the business buying process. Missing appointments can lead to delays in decision-making, which might allow competing buyers to swoop in with a better offer or the business’s situation to change unexpectedly. Appointments often need to be made by coordinating the schedules of (at the very least) you as the buyer, the seller, the seller’s broker and your broker. Rescheduling this many parties can take a lot of time – time you might not have if something changes. Staying on schedule ensures that you have the necessary information to make timely decisions, helping you seize opportunities before they slip away.

Keeping appointments might seem like a minor detail in the grand scheme of buying a business – but the impact of this simple act can’t be understated. From building trust to making informed decisions, every aspect of the business buying process is influenced by your ability to honor your commitments.

Are you thinking about buying a business and hadn’t considered how important it it to keep appointments? Would you like to know more about why your relationship with the seller is so crucial to success? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

Natural Disasters (Like Hurricanes) Shouldn’t Stop You From Buying A Business

Published August 21, 2023

Natural disasters shouldn’t stand in the way of your business dreams, they’re a part of life. If you want to live in a place that has a somewhat regular natural disaster risk (like hurricanes in Florida) you have a couple of ways you can think about this risk if your dream is to own your own business.

Deciding whether or not to buy a business should be made with a long-term perspective in mind. Remember that while natural disasters can cause immediate disruptions, they rarely dictate the long-term trajectory of a business. Also, buying a business that has survived and navigated through these types of challenges in the past showcases its resilience and ability to adapt to adversity.

There’s also the needs of a community that occur in the lead up to and after a disaster like a storm. Businesses that are well-prepared for emergencies (or those that provide essential goods and services during recovery) can experience heightened demand. As a prospective business owner, you can identify these emerging needs and position yourself to meet them.

After a natural disaster there can be a surge in construction, renovation, and related services. If you’re considering a business that caters to these industries (such as construction, disaster response, tree removal and the like) a post-disaster environment might present a unique chance to establish yourself in a market with increased demand.

Another potentially beneficial post-disaster situation? Some business owners might be more motivated to sell due to the challenges they’ve faced. This situation can lead to negotiation opportunities and potentially more favorable terms for you as a buyer. If you’re able to see beyond the immediate setbacks and have a solid plan for recovery, you could end up with a business at a better price.

Experiencing a natural disaster first hand can also teach you a lot. It provides invaluable insights into risk management and preparedness. When looking at businesses in a potentially disaster-prone area, you should consider what strategies you might use to safeguard the business and its operations against whatever mother nature throws your way.

Something like a hurricane can initially seem like an insurmountable obstacle to your business ownership dreams, but it should not deter you from pursuing your entrepreneurial goals. Resilience and adaptability really can turn adversity into opportunity – what defines success is your approach.

Have you always wanted to buy a business in a disaster-prone area but have concerns about what something like hurricane season might mean for you future business? Would you like to know more about businesses that do well in the aftermath of a hurricane? Ask us! Please leave any questions or comments and we would be happy to help.

Michael Monnot

The Power Of Practical Experience: Why Business Buyers Should Stay In Familiar Territory

Published August 7, 2023

Practical experience rarely gets the credit it deserves. Aspiring entrepreneurs looking to venture into the world of business ownership really need to follow the age-old adage “stick to what you know” – it can mean the difference between success and failure. Buying a business where you have practical experience offers a multitude of advantages.

Here’s a few:

Practical experience in a specific industry provides buyers with an invaluable understanding of its nuances, trends and challenges. Armed with this knowledge, buyers can make informed decisions and devise effective strategies to navigate the market successfully. This level of insight is often difficult to acquire without hands-on experience in the field.

Buying a business in a familiar domain allows a buyer to hit the ground running. They are already equipped with the skills, know-how and practical experience needed to run the business. This significantly shortens the learning curve and the saves time and resources that would otherwise be spent on learning an entirely new industry from scratch.

Buyers with practical experience are more likely to get approved for a transfer of the commercial lease when a business purchase doesn’t involve the associated real estate. A commercial landlord is going to be far more comfortable with a tenant who already knows what they’re doing.

A deep understanding of an industry also enables buyers to identify gaps and untapped opportunities. Leveraging their practical experience, they can innovate and introduce unique solutions or products to cater to specific market needs. This ability to innovate can give their new business a competitive edge and the opportunity for growth.

Purchasing a business in an industry where you have practical experience is a strategic move that offers you numerous benefits. Beyond the familiarity and knowledge of the industry, you walk in with a competitive advantage and a head start in business operations.

Have you always wanted to own your own business but didn’t think about choosing one in an industry you already know? Do you have questions about what businesses currently available would match with your practical experience? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

The True Measure Of Success: Emphasizing Cash Flow Over Aesthetics When Buying A Business

Published July 17, 2023

In the world of business sales, it’s all too common for prospective buyers to be swayed by how a business looks. The allure of aesthetically pleasing interiors, new equipment or fancy technology can blind them to the crucial factor that truly defines a business’s success: cash flow.

Cash flow is the lifeblood of any business. It represents the net amount of money moving in and out of a business, essentially reflecting its financial health. A small café with a newly renovated space or a manufacturing business that just invested in all new equipment might look fantastic from the outside – but without consistent, positive cash flow it risks becoming unsustainable. Cash flow ensures that operational expenses, employee salaries and other crucial financial obligations are met. Neglecting to focus on cash flow during the business purchase process can lead to severe repercussions down the road.

One of the main reasons buyers get lured by aesthetics is the misconception that a visually appealing business automatically translates into profitability. While aesthetics can play a role in attracting customers and enhancing brand image, they do not guarantee financial success. A beautiful storefront might draw initial interest, but if it doesn’t convert visitors into paying customers and generate sustainable revenue – it’s merely a façade.

On the other hand, a business that might not have the most captivating exterior or is full of older equipment could be backed by solid fundamentals and robust cash flow. This means the company is efficiently converting its sales into profit, reinvesting in growth and reducing debt – all of which contribute to long-term success.

Focusing on cash flow during the purchase process enables buyers to make informed decisions based on concrete financial data rather than deciding on a business because you like the paint colors and furniture. Conducting a thorough cash flow analysis helps determine whether the business has consistent revenue streams, assesses its ability to weather economic downturns and reveals potential areas for improvement. This is why it is far more important to examine the financial records than it is to do a physical walk-through of the location.

Savvy business buyers understand the importance of looking beyond surface-level charm and instead place emphasis on the financial stability of the business.

Are you looking at businesses to buy and want to know how to determine the cash flow a business is actually generating? Would you like to know more about how to see past a shiny exterior and make a decision based on financial health instead? Ask us! Leave any questions or comments here and we would be happy to help.

Michael Monnot

Business Buyer? How To Make Sense Of Add-Backs

Published July 10, 2023

Small businesses are complex, and this is especially true when trying to determine whether or not a business is listed for a fair price.

Taking a cursory glance at a tax return or a profit and loss statement can leave you scratching your head when comparing what you see with the listing price. How did the sellers get to that number?

The value of a business comes from it’s cash flow, meaning an operating business has value for a buyer because it generates money. This money isn’t all just cash, however, as an owner benefits from their business in a number of ways. For instance, many small business owners pay for personal expenses as part of their business to minimize their tax liability.

These owner benefits that are funneled through a business can make determining the value to a buyer a bit complicated. To help with clearing up any confusion there is a metric used to determine the value of a small business called Seller’s Discretionary Earnings, or SDE.

SDE simply means that you take anything personal that an owner gets from their business or anything that was a one-time expense (something a buyer wouldn’t have to repeat or worry about) – and you add that amount back into what the business makes so you can determine what the cash flow actually is.

What kinds of expenses get added back?

Discretionary expenses, like paying for a car or cell phone through the business. Think of these like perks that a buyer might not necessarily take, so that expense is added back in to show a buyer what the numbers look like without the added perks taken out.

Extraordinary expenses, like a very high salary paid to a family member who works in the business – a family member who would probably not be staying on once the business is sold. The amount of this salary that is above the industry norm would be added back into the business to normalize the payroll numbers. This way a new owner can see what the cash flow looks like with staff who only take a standard salary.

Non-Recurring expenses, like the cost of repairing water damage from a broken pipe. The new owner wouldn’t need to pay for something like this continually, so the one-time expense is added back in.

Non-Cash expenses, like depreciation. The tangible assets a business has, like the equipment or vehicles, will lose value over time. Although not the only factor in depreciation, you can think of this add-back as something related to what the business writes off for tax purposes.

Once all of these add-backs have been “added back”, you will be able to see the cash flow a business generates. This clearer picture will allow a prospective buyer to decide if a listing price is fair or not.

Still confused? Your business broker is there to help you untangle the parts of the small business world that are inherently complicated – like add-backs and listing prices. Talk to your broker if you think a listing price seems crazy or if you don’t agree with what was added back. They can make sense of the numbers – so you can make an informed choice about how much you would be willing to pay for a particular business.

Do you have more questions about add-backs? Would you like to know how sellers typically come up with listing prices? Ask us! Leave any questions or comments here and we would be happy to help.

Michael Monnot

Is This Where You Want To Live? Thoughts For Business Buyers

Posted in Buyers Articles

Published July 3, 2023

The romance of owning your own business can sometimes give a new buyer blinders about where the business actually is and what that means for the day-to-day life of the business owner and their family.

It’s essential to evaluate the local area where the business is located to determine if it aligns with the lifestyle you’re looking for and it has the amenities you need. Assessing the local area helps ensure that you not only invest in a viable business but also find a community where you want to live and thrive.

An important note here. Don’t trust the outward appearance or your preconceived notions of what a place is like. Google it. Visit. Call schools. Watch YouTube videos. Join Facebook groups to hear what people are really saying. Read the local news. You get the idea.

Here’s some things to consider when looking at not only where you want to work – but where you want to live:

Evaluate the local area’s lifestyle and determine if it suits you, your family and your goals. Consider factors such as climate, proximity to amenities, recreational activities, cultural attractions and community values. Ensure that the local area offers the quality of life you desire, as you will be spending a significant amount of time in this community.

Research the cost of living in the local area to understand its affordability. Compare housing costs, taxes, transportation expense, and other living expenses with your budget and financial capabilities. Ensure that the cost of living is sustainable and aligns with your income potential from the business you plan to buy.

Evaluate the local area’s accessibility and infrastructure. Consider proximity to transportation hubs, major highways, airports and public transportation. Assess the quality of healthcare facilities, schools and other essential infrastructure that may impact your lifestyle and the business’s success.

Consider the safety and security of the local area. Research crime rates, the effectiveness of local law enforcement and any other relevant safety measures. A safe and secure environment is crucial for your personal well-being, the well-being of your family and the success of your business.

Evaluate the level of community engagement and support in the local area. Look for signs of a vibrant community that values local businesses and encourages entrepreneurship. A supportive community can provide networking opportunities, word-of-mouth marketing and a customer base that appreciates local establishments.

It could not be more important to thoroughly research the local area before you buy a business. Your life outside of your business needs consideration just like P&Ls and purchase contracts. Sit down with your family and figure out what everyone will need to be happy and then find a business in a place that will meet those goals.

Are you thinking about buying a business and hadn’t considered researching where you would actually live? Do you have questions about what businesses are currently for sale in an area you like? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot