Running Your New Business From The Beach: What An Absentee Owner Needs To Do First



It’s an entrepreneurial dream. Owning a business that is run by a trusted management team that allows you to spend your days sipping drinks in a beach chair. The problems come when a prospective business buyer thinks this goal will be an instantaneous one, that all they have to do is pay for a business and then sit back and relax and let the checks come in. Nothing could be further from the truth.

 

While it is possible to get your new business to a point where you can be a semi-absentee owner, you will never be able to completely abandon your responsibility and it will take a while to get there.

 

What if you buy a business that is currently run as an absentee-owner business? Can’t you just walk in the door and take over this already existing arrangement? The short answer is no.

 

There are a few reasons. First, the seller’s trusted management system is theirs, not yours. Although it is sometimes possible to maintain management loyalty when a business passes to a new owner it is not guaranteed that the management in place will have the same amount of loyalty to you.

 

This can also be a precarious position for a new owner because if you don’t understand the ins and outs of the business, the details of the business that are needed to keep it profitable can go unchecked because you may not know they are (or aren’t) happening. Let this go on for too long and what you will be left with is no business at all.

 

Is it possible to have an absentee-owner business? Yes, but you have to realize two things.

One, you will never be able to completely ignore your business and two, there are a few things that need to happen before you can move to an absentee-situation.

 

  • First you need to find a good business to buy, and you need to run it yourself for at least a year so you know all of the ins and outs.

 

  • Then you will need to find a good management team (or a single manager if it is a small business) that you are able to trust. Have this management team work alongside you for about the next 6 months so you can be sure they are properly trained.

 

  • As you begin to relinquish power and responsibilities to your management team, it is incredibly important that you enable this management team to do their job by giving them the power to hire and fire, the power to change inventory, etc.

 

  • You will also need to come up with a system that will keep you informed of, and on top of, what is going on within the business.

 

  • Lastly, keep a close eye on your business, even if you aren’t there everyday. Make frequent unannounced visits, go over the financial records regularly, etc.

 

While it is possible to be an absentee owner in some types of businesses, the majority of business situations are going to require a much larger commitment from you.

 

If absentee-ownership is your ultimate goal, bring this up in your initial discussion with your business broker so they can help you to find businesses where this system will work.

 

Have you ever considered owning a business, but would ultimately like to be fairly hands-off with the day-to-day operations? Please feel free to leave us a comment or question here, and we would be happy to help you find a business that fits your goals.

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
1910 Park Meadows Drive, Suite 202
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com

 


Doing the Valuation Tango with an Overpriced Business



It is absolutely shocking how many businesses end up on the market with a ridiculously high valuation and an outrageous asking price.

 

Why does this happen? When a seller is allowed to decide on an asking price, the value they place on their own business usually has little to do with what the business is actually worth to a buyer and more to do with how much money they feel they have invested, how much they think they’ll need for retirement, etc.

 

Many business brokers allow their clients to set the listing price simply because they want the listing, not because it is what is in the best interest of the seller. Some sellers and brokers alike also set an asking price high because they want to use it as the high end of a negotiation scheme. What this does in reality is drive away buyers and stick the business in listing purgatory.

 

As a buyer you are likely going to deal with listing prices that are way too high, but the solution is not to send in a low-ball offer and hope it sticks. That is the last thing you should do because it will almost always severely offend a seller to the point that they will refuse to work with you. On the other hand, you are not willing to overpay for a business, so what should you do?

 

The answer is initially ignore the asking price, as long as it is generally in the ballpark of what you are looking to spend. For instance, if you are only willing to invest $50,000 in the purchase of a business, you should probably not consider businesses listed for $300,000. If you initially ignore the listing price, you will give yourself a chance to determine what the business is worth to you.

 

How do you determine what you should offer? First and foremost, use your business broker for help. They know what comparable businesses have sold for, what the local competition means in terms of price and what the industry trends are. You will also need to look at the business and its numbers to see if fits with what you are looking for. Whatever you offer will need to be backed up with why you think that price is appropriate, so consider all aspects before deciding on an offer.

 

Also, the better the relationship you have with a seller, the better your transaction will be, so be sure to give a respectful offer with some real reasoning behind it. Trying to start negotiations by sending in a very low offer is as ridiculous as the seller setting an outrageously high price as a starting point for negotiations. The two sides will be too far apart for any meaningful negotiations to begin.

 

The moral of the story is that everything in a business transaction is negotiable, so just because a business is listed at a specific price it doesn’t mean that is what it will sell for.

 

Are you a buyer who can’t seem to find a business with a reasonable listing price? Do you have questions about how to determine what you should offer for a business? Please feel free to leave us a comment or question here, and we will be happy to help you.

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
1910 Park Meadows Drive, Suite 202
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com


I Want a Premium Price for My Business, Will I Get It?



As a seller, you want to get top dollar for your business, but wanting the world and getting the world are vastly different matters. Every seller wants top dollar for their business, but what is most important when the time comes to sell is to be realistic.

 

What kinds of things are buyers looking for when they are determining what to spend on a business? They are looking for industries that are in demand, for businesses with a large market share, for businesses that are performing well and are profitable.

 

What if my business doesn’t have those qualities? Don’t be disheartened if your business isn’t the industry leader or even if your business isn’t currently turning a profit. Businesses in the red sell all the time, and for the right buyer with the time and resources to make the changes necessary to get back in the black – that business can be a terrific buy.

 

The key to getting the best price for your business is to focus on the strengths, the opportunities for growth, and on the parts of the business that make it unique. If you play up the plusses, you will get a better return on your investment.

 

The key here is to be realistic. It is incredibly important for the success of your transaction that you keep your eyes on the goal of selling your business. If you don’t get the premium price you had hoped for, you can at least get a fair price for what you are offering. If you still insist on waiting for an unrealistic price, you may languish in the market indefinitely.

 

Are you trying to sell your business but your numbers don’t look good? Are you curious about how much you could get if you sold your business today? Please feel free to leave us a comment or question here and we will be happy to help you with selling your business.

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
1910 Park Meadows Drive, Suite 202
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com


Business Buyers and Sellers: What Makes a Business Valuable?



Whether you are a business buyer or a business seller, the most important part of any business sale is the amount of money that is going to change hands.

 

When you are deciding on a listing price or on how much to offer a seller, you will need to make your own determination of what the business is worth.

 

At first glance, it seems reasonable that a business is worth what the financial records say it’s worth, and perhaps the value of the inventory, but the nuances of business pricing are typically much more complicated than that. Here is a great place to use an experienced and knowledgeable business broker for help. They know the nuances of pricing inside and out, and could be a great asset for this part of the process.

 

What are a few aspects of a business that may not be initially obvious in terms of value, but can bring value to the table nonetheless? These are the kinds of questions you should be asking when determining either a listing price or an offer:

 

Does the business have a well developed management team in place and happy employees? Is the staff organized and do they have clearly defined roles?

 

What kinds of operating procedures are in place? Does the business have an organized system for dealing with things like inventory control and tracking sales?

 

Are the financial records clear and up to date? Do the records accurately reflect the numbers the business generates? Is there a very limited amount of personal expenses?

 

Does the business have a strong internet presence with a professional website? Does the business have a marketing plan in place and implemented? Does the business make use of all possible avenues, like social media, for bringing in new customers?

 

Does the business have room for growth? Is the infrastructure in place for scaling the business in the future? Does the business have an aspect that makes it unique in the market?

 

Is the staff situation sustainable? Are employees cross-trained? Do key employees have the motivation to stay on if the business changes hands?

 

Are there a limited number of liabilities in the business? Is there any pending litigation? Is there a diversity of clientele?

 

When deciding what you want to get for your business or what you are willing to pay, don’t just focus on the books and the inventory list. Use the knowledge and expertise of your business broker to determine what parts of a business bring more money to the table.

 

Are you a seller who is trying to determine the listing price for your business? Are you a buyer who has questions about what to offer for a specific business? Please feel free to leave us a comment or question here, and we will be happy to answer your pricing questions.

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
1910 Park Meadows Drive, Suite 202
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com

 


Secret to Selling Businesses



My Secret to Selling a Business

Do you know what drives business sales?

Marketing, proper pricing, the right presentation, the network of the broker, finding qualified buyers, proper documentation… I can go over a plethora or reasons but I want to focus on the marketing package that a broker SHOULD prepare but many do not.

As we all know the importance of a first impression and unfortunately the marketing materials we get from other listing brokers is a simple P&L, tax return or something similar but most buyers do not know how to read and interpret them properly and most businesses P&L or tax returns do not reflect true income such as the typical add backs like depreciation, interest, many personal items like health insurance, cell phones, personal vehicles…but that buyer is going to look at the bottom line and usually that does not look the best.

Buyers today want real information and I know what buyers are asking for.

1. Recasted Financials: Let me properly recast your financials and show the true benefits of the business. I n the past I have found a business that paid for all personal airplane fuel, I have properly amortized large expenses to increase revenues and many more examples

2. Benchmark Data: I will actually research the industry to provide market data about the industry to a buyer to make sure they are comfortable. This often assists in weeding out many of the bad businesses so that we can get a properly educated and focused buyer.

3. SWOT (Strengths – Weaknesses – Opportunities – Threats): This is a true key to selling a business. It is important to make sure a buyer know the flaws of a business to understand the opportunity to grow the business.

4. Trends: Another important part in selling a business is providing the positive trends in either the business or the industry

5. Expert Comments: I will provide expert comments and recommendations from industry experts and insiders to back up my information

6. Media: Most of our buyers are from other states or even other countries. Every package I put together includes some type of media which allows us to direct buyers to reviews, articles, video or pictures. It is shocking how many brokers do not even include simple pictures.

7. Sellers Duties: You may be surprised but most brokers do not know the actual duties of the seller and this is very important to obtain qualified buyers and not to waste the sellers time.

8. Employees: Many buyers are coming here and bringing family members. Knowing the employees pay and duties are another great way to sell a business as we will incorporate the family in the opportunity and show a bigger bottom line.

9. Website: To many brokers do not even have their listings on their own site. If this minimum duty cannot be accomplished would you want to list your business with them?

Again this is just one small part of the overall process of selling a business but picking the proper broker to sell your business can save you time, money and frustration. Picking me as one of the top business brokers in Florida will be one of the best decisions you will make.

I do not sell a business by just putting it on a website, I have streamlined my systems, accumulated an extremely large database and developed my own technologies to sell businesses.

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
1910 Park Meadows Drive, Suite 202
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com


Is Your Business Broker Working for You or Themselves?



Is Your Business Broker Working for You or Themselves?

I think this is a fair question every business buyer and seller must ask their business broker prior to working with them to buy or sell a business.  I raise this question because I see so many individuals become business brokers because they think business transactions is a viable sideline.  It is not.  The best in this game are 100% dedicated to their craft.

Here are some brokers, names excluded to protect the guilty, who I continually receive complaints about:

Broker #1:  Owns a portrait studio as his main business.  Contact with clients is almost always through their admin.  Seldom answers or returns calls because they are busy taking photographs of his real clients.

Broker #2:  Spends time as an expert witness and providing litigation support.  Difficult to schedule meetings with because they are often traveling out of town.

Broker #3:  Owns an equipment valuation franchise.  Difficult to schedule meetings with because they are often traveling out of town and has no supporting staff for backup.

Broker #4:  Sells predominately commercial real estate.  Lists many businesses and sells very few.  Very weak on packaging and marketing businesses because their marketing efforts are passive such as those typically used by commercial realtors.

Broker #5:  Came from corporate America and bought a franchise. They never owned their own business let alone bought or sold a business for themselves.

Broker #6:  Young and poorly trained.  Breaches confidentiality by handing out names of businesses for sale to buyers without the proper paperwork, i.e., non-disclosure agreements and financial verification.

What do each of these brokers have in common?  Either by time commitment or educational commitment, they only have one foot in the business brokerage industry.

Me:  I work exclusively with buyers and sellers to transact businesses.  I return calls personally.  My assistance is back office support only.  When I am out of town, it is for education/training on business sales or an out of town buyer or seller looking to transact a business. I actively market businesses to a wide number of prospective business buyers through email marketing, social media and affiliations with other brokers.  I have owned, bought and sold businesses for myself.  And, finally, I stick to the process. Protecting confidentiality and exuding professionalism are keys to success in this business and I am committed to both.

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
1910 Park Meadows Drive, Suite 202
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com


What a Business Buyer Needs to Do to Keep The Deal Alive



Business deals fall apart everyday, and if you are really serious about buying a business, you will have to do your part to keep your deal in motion all the way to the closing table. How does a buyer keep the momentum going?

 

Here are a few ways:

 

First and foremost, go into the business buying process with the realistic attitude that a perfect business does not exist. All businesses are going to come with issues, you will just need to decide on a case by case basis what types and sizes of issues you are willing to overlook or deal with.

 

Another very common issue that arises with buyers? Don’t over-analyze the business. While it is incredibly important to use your due diligence phase to discover any problems with the business (before they become your problems after closing), there is a point where cautiousness turns to an unnecessary analysis of risk. All business dealings come with a certain amount of risk, there will never be a circumstance where you can avoid it all. Be cautious but not crazy.

 

Another way a buyer can do their part is not to ask for enormous lengths of time to look at the books. A few weeks should be sufficient. It is unreasonable to ask a seller to pull their business off the market for inordinate amounts of time, especially if you then decide not to buy.

 

Don’t forget about things like leases and licensing. These parts of the business transaction sometimes involve a lot of back and forth with red tape, so make sure you get started on them right away. You don’t want to be without the proper licenses the day you take over the business.

 

It is not always an issue with the buyer’s side of the deal that can hold up a sale, so don’t be afraid to push the deal forward if you feel that the other side is taking too long to get you information you need. Due diligence is your chance to run through the financials, but you will need to be aware that the seller is trying to run a business while all of this is going on, so keep your time demands realistic.

 

The buyer side of the deal can slow a sale down just as easily as the seller side can. If you are serious about buying a business, do your part to get to the closing table and you will have a much better chance for a successful transaction.

Are you a buyer who has been a part of deals that have fallen apart? Do you have questions about the best way to get to the closing table? Please feel free to leave us a comment or question here, and we will be happy to help you with the business buying process.

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
1910 Park Meadows Drive, Suite 202
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com

 

 


Are These Books Cooked? What Business Buyers and Sellers Need to Know About “Creative” Financials



When you put your business up for sale, you obviously want to present the work you’ve done and your assets in the best light. What you don’t want to do is overdue it. It is incredibly important to avoid the mistake of trying to make the business look good by falsifying, leaving out, or misrepresenting your financial information. Not only can these “creative” financials be illegal, it is always incredibly unethical.

 

As a buyer, you obviously don’t want to end up with a business whose numbers are no where near what was described.

 

For both sides of the transaction, the due diligence phase will be the great equalizer. This part of the transaction is where the buyer gets to go over the books. If you are a seller who has tried to tweak your numbers, this is where your tactics will be discovered. When buyers find out that the numbers aren’t true, the deal will more than likely fall apart.

 

Here are some common instances of creative number tweaking that sellers should avoid and buyers should look out for:

 

Don’t try to over value any assets in the business. If you bought the kitchen hood five years ago, you are not going to be able to put today’s retail price for the new model on your asset list. Be realistic, and use the help of your business broker and your transaction accountant to put price tags on the business assets. Only use a business transaction CPA for this, as a CPA unfamiliar with the ins and outs of a business transaction will always give you values that don’t jive with the current business market.

 

Don’t undervalue any liabilities, tax debts, etc. This will cause the net worth of the business to appear much larger than it actually is. The buyer will more than likely find out, and then they will be unable to trust anything you say moving forward.

 

As a seller, the temptation might be there to make your business appear more stable or profitable than it already is, but what you need to know is even unprofitable businesses sell. If a buyer is ready, willing and able to make the necessary changes you have been unable to make, your business will be a great buy for them.

 

As a buyer, you need to be vigilant during the transaction process, especially during the due diligence phase. If something seems wrong, it probably is. The same holds true for businesses that appear too good to be true. Use the services of a business broker and a business transaction accountant to help you decide if the numbers really are what the seller claims they are.

 

The conclusion? Be honest from the get go, and deal killing issues will not arise later.

 

Are you a buyer who is suspicious of the numbers you were presented with? Are you a seller who is concerned about revealing your true numbers to buyers? Please feel free to leave us a question or comment here, and we will be happy to talk with you.

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
1910 Park Meadows Drive, Suite 202
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com



Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907




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