You may have your business listed on the market, but that doesn’t mean that your responsibility as owner has stopped- on the contrary, this is the time your business needs you to be at the top of your game.

The typical time period for a business to go from listed to sold can be 9 to 12 months, so allowing yourself to check-out is out of the question. The worst mistake a business owner can make is to let the responsibilities of the business go. You might be ready to move on to the next phase of life, you might be counting the money you hope make, you might be dreaming about retirement- but the time to focus on these thoughts is after the sale, not before.

What can happen if you stop paying attention to your business?

The most obvious answer is that the business will suffer. It may seem to an owner on the way out that the business is no longer their problem, but this is not the case. Here’s why:

Your business might not sell. Sometimes you are ready to sell, but there is not a buyer ready to buy. Sometimes after a time on the market, an owner will pull a business off the market for personal reasons. Perhaps you have priced your business too high. Whatever the reason, you don’t want to be left with a business in a hole that you will have to dig yourself out of.

Buyers look for businesses that are profitable, and ultimately  a business that is on the rise. If you let your business slide, it may appear to potential buyers that you are trying to unload a failing business when this couldn’t be farther from the truth.

How am I supposed to focus on my business if I’m trying to sell it?

Hire a good business broker. A business broker can focus on all the aspects of your business sale while you focus on keeping your business profitable. This will ultimately help the final sale price of your business because a profitable business will bring in more money in the end.

The key to a successful sale is a successful business.  Use the resources of a business broker so you can focus on keeping your business in the black.

Are you thinking about selling your business, but have questions about what a business broker can do for you? Leave us a comment or question here, and we will be happy to assist you with your business sale.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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When a business owner decides that the time has come to consider selling, there are many aspects of the business that will need a closer look- hopefully before the business is listed on the market. An important area to consider during this process is the books.

If you are looking to sell your business, think for a moment about what needs to happen with your finances when a buyer makes an offer. When someone makes an offer on your business, due diligence begins, and during this period a prospective buyer gets a chance to go through all of your financial records. Are your books ready for this process?

If the answer to that is no (if your financial records consist of a QuickBooks account that you’ve never given much thought to, or if they’re nothing more than a bunch of boxes in the back stuffed with paper and receipts) then now is the time to act.

The best way to get your finances in good order is to hire professional help. Ask your business broker to recommend a CPA who has experience and knowledge with preparing a business for sale. The right CPA will be able to assist you with clearing out any “skeletons” and making your records easier to interpret by buyers.

Just like you would clean a house before you let prospective home buyers in, you need to clean up your books, find any issues that arise from a good look through them, and then address and correct these issues. If you deal with any financial issues in advance, then those problems won’t become negotiating points for the other side as you near the closing table.

Your records are the main way you prove that the price you are asking for is a fair one, so having them in a user-friendly form will greatly help during negotiations. Using a qualified CPA will insure that the books are easy to read and your numbers are easy to prove.

Planning ahead also means you can address problems and fix issues without the pressure of a buyer peering over your shoulder. By solving these issues in advance you will be able to present your business in the best light, instead of playing catch-up after the first impression has already been made.

Are you a business owner who has been thinking about selling, but your books are not in the best shape? Please feel free to leave us a comment or question here, and we will be happy to help you get your finances in ready-to-sell order.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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Even in a great economy, banks have never been big fans of lending money to individuals for the purchase of a small business, so what makes the business world work is seller financing.

Many business sellers shy away from financing a part of their business sale, instead hoping for the elusive all-cash buyer, but this can be a big mistake.

Why?

It can be incredibly hard to get third-party financing for buying a business, and all-cash buyers are extremely few and far between. If a business seller refuses to offer seller financing, they are slamming the door on a large number of potential business buyers. The key to success in the sale of your business is to offer to finance part of the transaction.

Two-Fold Benefits

Seller financing can be a great selling tool because it opens your business to many more potential buyers than you would have attracted otherwise. Listing your business as one that will offer seller financing will generate more activity and will put your business ahead of others who are not offering financing. Using this approach will open your business to a much bigger pool of buyers.

The other way that seller financing benefits your business listing is that it is an attractive deal term for buyers.  By offering financing, you are expressing your belief in your business and its success over the long term, something that buyers will like to see. It is a key component of closing a deal.

What would seller financing look like for me?

The terms you will offer will depend on considerations of rate, length of term, and the amount you are willing to finance. Terms typically range from one to five years, but it varies greatly. You and your business broker will consider what percentage of the total price you are comfortable with, and what realistic terms would be.

What if I really don’t want to offer financing?

Ultimately, this will be a big mistake. You will drive away buyers, and your business will not generate the activity it could on the market. Instead, try to be open-minded, and perhaps list your business as one where seller financing may be negotiable.

The success of any business sale depends on attracting the right buyer, so do your business and yourself a favor and be ready to offer seller financing.

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

941.518.7138
Mike@InfinityBusinessBrokers.com

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Small businesses have always been a place where families get to work together. Many small businesses use family members as staff, and this mixing of family and business life can bring many benefits.

You know the people working for you better than a regular employee. You can trust employees who are related to you, and in most cases you will get a great deal of loyalty from family members within the business. It is also a fairly common practice to pay family-employees less than fair market wage, or even nothing at all.

What a business owner ends up with is loyal and trustworthy family-employees at a bargain, how could this possibly be a bad thing?

It’s a bad thing when it comes time to sell the business.

Why?

There are two main reasons, reasons a business owner needs to consider long before they want to put the business up for sale.

The first of these is value of the business. A client with a small restaurant had several children who worked as wait staff, and they were not paid hourly as the rest of the staff- they only took home what they earned in tips. The amount of work that these essentially unpaid workers did was very significant, as they helped in all aspects of running the restaurant. When buyers were evaluating the business, they had to add back in the fair wages these children never took, dropping the value of the restaurant substantially.

Another problem with the family-employee is loyalty at the time of the sale. If your kids are working for you because they feel like they have to instead of because they have a genuine interest in the business, there might not be much chance of them staying with the business once you’re gone. This can pose problems for a new owner, especially if those children are key employees within the business.

How can you avoid these pitfalls?

The most important thing you can do to protect the value of your family-run business is to be sure that all employees are paid at least fair market wage. Most business owners end up having to sell long before they thought they would be ready, so by having everyone “on the books” in this way, you are protecting the value of your business.

You can deal with issues of loyalty by having non-family employees who are trained to fill the positions of family members, even if they never do. By cross-training your staff in this way, you can ensure that a new owner will be left with a competent staff even if your family members decide to leave the business.

Do you own a family-run business and are concerned about the value of your business or employee retention after a sale? Leave us a comment or question here, and we will be happy to assist you with getting the most out of your business.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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When you are in the process of selling your business, one of the toughest periods is the negotiation table.

Why?

You might be selling a business, but when it comes time for the hard negotiations to begin, it is really just you and the buyer across the table. The miscommunication that is rampant at this crucial step in the business transaction process kills good deals all the time.

How do you avoid the pitfall of the negotiation table disaster? Try to think like the person across the table.

Your business is your baby. You have spent what seems like countless hours and all of your blood, sweat, and tears to get it to where it is today. Your business is literally a part of you, and no numerical value can ever really quantify what it means to you. To a buyer, your business is a set of financial records and a price tag.

Your staff is like a second family to you. They may not all be perfect employees, but you have kept them around for reasons that only being a part of the business’s history can explain. To a buyer, they are a list of names and titles, and they will either conform to the new owner’s paradigm or be let go.

The price you agreed to for the listing of your business is, at least in your head, the bottom dollar you are willing to take. Any offer that comes in below asking will be truly and deeply offensive to you. To a buyer, the listing price is a starting point for negotiations, and they are going to try and pay as little as possible for your business so they have capital left over to work with.

The way you run your business is how you like things done. You are the boss, so it has always been your way or the highway. Anyone who comes in asking questions about why you do things the way you do is clearly trying to insult your intelligence. To a buyer, it is as simple as needing to understand the reasoning behind the way your business is run, nothing more.

What is the same in all of these examples? The overt emotion on the part of the seller and the lack of emotion on the part of the buyer. Selling your business is an emotional process, but if you want your transaction to be successful, it is critically important that you leave your emotions at the door. This is, after all, a business transaction, one that can be easily derailed when emotions are allowed to have the upper hand.

The easiest way to avoid an emotional negotiation is to hire a professional to do it for you. Using a professional business broker will help to provide a much needed buffer at the closing table, one that will be able to keep things moving even if the emotional barrier gets crossed. The other way to avoid losing a deal is to try your best to stay an objective seller. Treat your transaction as what is is, a set of business decisions and nothing more.

Are you a business seller who has a hard time removing the emotional component of your business sale? Leave us a comment or question here, and we will be happy to help you become an objective seller.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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As a business owner, you are your own Board of Directors, as all of your major business decisions are made by you alone. This can be a big job, especially because you may be an expert at running your own business, but you are not an expert at everything.

Who do you turn to when you need an expert’s advice?

For many small business owners, the answer is simple; you turn to your accountant or your attorney for help. Is this a good idea? It may be in some circumstances, but there are important caveats for using this advice.

What about my attorney?

Your attorney is probably very specialized as almost all attorneys are. They may be in family law or specialize in personal injury claims. This specialization in the legal field is only going to help your business if you are using the appropriate attorney for the appropriate reason. You should have a business law attorney as your primary counsel, and then employ a more specific attorney if necessary, like a business litigation attorney if you are party to a lawsuit or an attorney who specializes in labor laws for a labor dispute.

What if you want to sell your business?

If you are looking to sell your business, then you will need an attorney who specializes in business transactions.

Why not just use your primary business attorney?

There are a few reasons. First, business transactions require specific knowledge just like any other area of the law, so a business transaction attorney is going to be the most knowledgeable.

Second, selling a business, like all other business related decisions, comes with a bit of risk. The job of your primary attorney is to protect you from any and all risk, so they will likely be forced to advise you against your own business sale because of the inherent risk. Non-transaction attorneys kill business deals every day, deals that would have been fine had the appropriate counsel been sought.

Third, transaction attorneys are more efficient at negotiating and closing business deals than an attorney who has never closed a business deal before. It will mean less billable hours and more money in your pocket if you use a transaction attorney instead.

What about your accountant?

Accountants are different from attorneys because they are typically not as specialized, although you should really use as your primary accountant a CPA who has experience in your particular industry. Your primary accountant should be able to help you organize your financials and prepare your tax returns.

What your primary accountant should not do is give you a valuation for your business, or give you a valuation for any business you are looking to purchase.

Why? Business valuations are complex, and there are accepted methods for preparing a business valuation that an accountant who does not specialize in this field will not know. Typically valuations done by an unqualified accountant leave business owners with unrealistic expectations in the business market. Avoid this pitfall by hiring an accountant who specializes in business valuations.

What’s the lesson? Who’s advice is better, your attorney’s or your accountant’s?

The answer is neither if they are giving you advice outside their realm of expertise. As a business owner, you will need advice, but make sure that it is good advice. Hire a team of experienced professionals, and only use each for what they specialize in. In the long run, it will save you from suffering the consequences of uninformed advice.

Are you a small business owner who has dealt with the consequences of uninformed advice? Leave us a comment or question here, and we will be happy to assist with getting you more informed answers.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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If you are a business owner who has considered selling, there are a few things you can do to boost the value of your business long before (or even shortly before) putting your business on the market. Any exit strategy needs to include an element for building value if you are going to get the biggest bang for your buck when your business sells. Here are a few things you can do as part of your exit plan to boost your value on the market:

There are essentially three categories of value-building: generating growth, improving cash flow, and reducing risk.

Generating Growth

When you generate growth, you create future projections for your company that will mean future rewards for a buyer, rewards they will pay for by paying more for your business. Look for new products, new opportunities, and new markets. Revamp your marketing and sales approaches for what you currently offer. The price your business sells for is not just based on what you earned in the past; it will also be tied to future cash flow.

Improving Cash Flow

To improve your cash flow, you will need to efficiently manage your working capital. Make sure you are managing your finances properly, and constantly look for ways to cut costs. Also look for content within your business that could be proprietary elements.

Reducing Risk

One of the best ways to reduce risk is to diversify. Make sure you build a diverse list of customers. You also want to have multiple suppliers, eliminating depending on just one place to acquire what you need to keep your business running. Look within your operations for places to diversify as well. Do you have “indispensable” employees? Perhaps a diverse management team, each member of which only has partial responsibility, will protect your business value better than one all-important employee whose loss would be a big detriment to your bottom line.

Are you ready to consider selling, but want to boost the value of your business? Leave us a comment or question here, and we will be happy to assist you with business building techniques.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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You are ready to sell your business, ready to move on to the next stage in your life, but are you really ready to put your business on the market? Once an owner decides that it is time to sell, they frequently get a one-foot-out-the-door mentality, and the truth is without a good deal of prep work on your end, your business transaction will likely not end up like you hoped it would.

Why not?

You need to (1) decide on a price, (2) get together what will be required during due diligence, and (3) ready the business itself for sale.

How does one decide on a price? The best answer here is to hire good help. As a business owner you may have a golden price floating around in your head, but the reality of the market is a business is only worth what someone is willing to pay for it. Hire a good business broker, someone who has experience in your market sector. Bring all of you financial records (like the past three years of tax returns, your P & L statements, etc.) and have an open-minded conversation about where you should price your business so that it will actually sell. If a broker will let you list your business for whatever you want, steer clear. An overpriced business will sit on the market indefinitely. If you don’t have your financial records in order (like they’re all wadded up in a stack of boxes in the back), then now is the time to get them straightened up for part two, getting your due diligence material in order.

What is due diligence and why do you need to be prepared for it? Due diligence is a period of predetermined time that occurs after an offer or letter of intent is given to the owner of the business. This time allows the potential buyer to take a good look at the business, like checking on inventory and combing over the books. You do not want to have to scramble, leaving your business unattended while you are trying to get the paperwork together.  It will make you look unorganized to the buyer as well as potentially hurting the bottom line at a time when you are trying to get the most money from that bottom line. Say it takes you a week away from your normal business responsibilities to get what is needed for due diligence assembled, how much could the numbers falter in that time? If they do, then you can expect any potential buyer to want the price lowered accordingly.  You can avoid this pitfall by simply being ready before you business is even listed. Having everything ready will also give an added benefit of less stress for you in a potentially stressful time. If you are unsure of how to get your books in order and assemble what you’ll need for due diligence, ask your business broker for help.

The third part of business sales prep is readying the actual business for sale. This can be as simple as a good thorough cleaning, or as complex as renovation work. Your business needs to be in good shape. The most common complaints from prospective buyers about businesses are easily fixed cosmetic concerns, like “the place is filthy” or “the kitchen doorknob fell off in my hand”. If you want to get top dollar for your business, you want buyers to see your business in the best light, so repair what needs fixing, give rough looking walls a fresh coat of paint, and get the place clean. That all-important first impression will mean more money in your pocket at the end.

Are you a business owner who has decided to put your business on the market, but you are unsure of what to do next? Leave us a comment or question, and we will be happy to assist you with getting your business ready to sell.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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