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

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

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

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