One of the greatest aspects of being a small business owner is your business is your own. You’ve made it into what it is today, and for the most part small business owners love what they do. Difficulties can arise, however, when you’ve made the decision to sell your business.

For many it can feel like your business is your whole life, and as such it can be difficult to sever that tie at a closing table. From time to time deals fall apart because a business seller looks at what comes after the closing table and begins to get panic-driven cold feet. The sense of loss of control, coupled with the fact that a seller basically becomes unemployed the day they sell their business, can absolutely get in the way of reaching the closing table.

What can you as a seller do to keep from derailing your own sale?

Take some time to prepare yourself for post-sale life.

The first thing to do is think about the way you describe your business. We sometimes feel like a business is so much a part of our lives that we use the same terminology we would for the people in our lives.

Do you love your business? You may think that you do, but what you actually love is what your business does for your life. If you break it down for yourself you probably love the fact that you are your own boss and the freedom that brings. Think about the time after the sale in the same way. You will still be in control of your day to day life and you will have much more freedom than you do today.

Another common feeling may be the satisfaction you get every day from getting to wake up and do what you love. If the sense of purpose you get from your business is what you will miss the most, find something else to do post-sale that will give you the same level of satisfaction. If you had your own construction business, you could volunteer your time to build homes for veterans, for example.

The key here is to not let your emotional connection to your business keep you from selling. Think about how you can keep the parts of your business life that you love after the sale and you will be better prepared to let go.

Are you a seller who is nervous about selling? Do you have questions about how to better prepare yourself for life post-sale? Ask us! Please feel free to leave us a comment or question here and we will be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

Any business owner who has forward vision for their company should have a well defined exit strategy. It’s just good business practice to know when and how you would get out of your business if the time or circumstance presents itself.

When that time does come and you are ready to put your business on the market, you need to act like you have no exit strategy at all.

Why? Here’s an example.

A seller with a small transportation company really wants out, and against the advice of his business broker, he tells every prospective buyer who comes in the door just that. He offers up the bottom line number that he would accept, and tells buyers he is completely burned out and totally ready to sell. He thinks that by seeming eager to sell, buyers will be eager to buy. The exact opposite is true.

His attitude and actions give the impression that the business is a disaster he is trying to run away from – fast. He never gets any offers because buyers don’t want to take a chance on a business that the current owner doesn’t even want. He never sells the business, opting instead to close the doors.

This situation could have ended very differently and in a positive way. The business was in good shape and had room for growth.

When you put your business on the market and begin to get offers from potential buyers, it is critically important to keep your exit strategy under wraps. You need to behave as if you don’t need to sell. A seller doesn’t want buyers to think they have to sell, that they are in any way desperate or that they are trying to get off a sinking ship before the business folds. Sellers that seem too eager to accept any offer will get just that – any offer (or no offer at all).

In the business market it is a seller’s job to put their business in the best light so they can get top dollar. The buyer’s job is to drive the price down as much as possible. A seller who seems too ready to get out of their business will attract buyers who are looking for a cheap steal, not the motivated buyers who will be willing to negotiate.

Instead of making buyers aware of your exit strategy, you should have in place and ready to implement a three year plan. This plan should include ideas for growth, new marketing strategies and plans for any necessary improvements.

Even though these are ideas that you have not yet implemented, they will be ideas that a prospective buyer can use to visualize the future of the business under their leadership. These plans will also be a powerful negotiating tool as they will allow you the power to walk away from any deal where a buyer refuses to negotiate for a fair price. Better still, if you are not able to sell your business these plans will help you grow your business for a sale at another time.

When you are ready to sell your business, you need to keep your focus on the growth of your business if you want to instil faith in potential buyers that the business has a successful future. If the seller in our example had done just that, he would have sold his business and not had to close the doors. Keep your exit strategy to yourself, and you will have a better chance at a successful sale.

Are you a seller who wants out, but would like help showing buyers that your business has room for growth?  Do you have questions about how to make a three year plan? Please leave us a comment or question here, and we will be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

One would think that a business seller would do everything possible to get their business to the closing table, but in the business market deals fall apart because of the carelessness of sellers more often than they should.

Here’s an example. A buyer is interested in purchasing a large pizza restaurant, and although the buyer has some experience in the restaurant industry – they are not comfortable with taking over such a large establishment right out of the gate.

During discussions with the seller, an agreement is made so that the seller will stay on as an acting manager for the first six months after the sale to train the new owner and provide stability with the employees and vendors.

After this agreement is reached and three weeks from the closing table, the seller begins to show up late or not at all to scheduled meetings with the buyer. This happens enough times that the buyer loses confidence in the seller to point of deciding not to go through with the deal.

The issue here is the seller, who mentally checked out long before they should have. It can be difficult to stay focused on a business you are no longer going to be responsible for, especially when your thoughts are on the future and what you will be doing with your life after the sale.

However, this is the most important period for you to be on your “A” game. Your actions will speak volumes about how you feel about the seller, the transaction and the future of your business.

Stay motivated and don’t check out. If the seller in our example had followed through on the promise made to the buyer, then they would have sold the restaurant and shortly been well on their way to a new chapter in life.

Are you a business seller who is ready for your your business to be sold? Do you have questions about what you can do to instill confidence in buyers? Please feel free to leave us a comment or question here and we will be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

When you own a business, your head must be in the game in terms of the day-to-day operations, otherwise you wouldn’t be successful. One of the most difficult parts of trying to sell your business will be to take that mindset you’ve been using to make your business what it is today and change it around so you can see what any potential buyer will.

Every business that is headed to the market can benefit from this change in view, as it will allow you to see what changes are needed to get your business to a point where a buyer will be willing to invest their time and money.

To start this process, ask yourself a very simple question. If you walked into your business today, exactly as it is, would you buy it or not?

If the answer is yes, are you truly looking at the business with an objective eye? If you feel that you are, think of reasons why you would buy your business all over again. These aspects of your business are the ones you will need to highlight for a prospective buyer so they can see the business in the same “good investment light” you do.

If the answer to the question of whether you would buy your business again is no, what reasons do you have for feeling that way? Does the business need major aesthetic renovation? Are there more things that need repair than you have the time or money to handle? Are the systems of operation inefficient? Are there changes you would love to make, but for one reason or another you never have?

The answers to these kinds of questions are the issues you will need to address long before you list your business on the market. If you are truly unhappy with parts of your business, any buyer that comes through the door will likely see these parts in the same way. Fixes now will keep you from losing buyers down the road.

Make repairs, thoroughly clean, add a fresh coat of paint, streamline operations, get the financial records in order, etc. Even minor changes can help your prospective buyers to see the business in the best light possible.

Are you thinking of selling your business, but you are unsure of what buyers are looking for? Do you need help seeing your business as an investor instead of as the owner? Please feel free to leave us a comment or question here, and we would be happy to help you get your business ready for the market.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

Requesting marketing packages from other brokers on their listings this week has again made me think how sorry I am for some of the sellers getting stuck with a bad broker.

Here are the two last marketing packages I received.

#1 – “Thanks for the NDA . Company is XYZ. website is www.XYZ.com. Please email or call if your prospect would like to see the business. Could be a great add on for him.”

This broker will rely on the seller to explain the business, so why does he really even need a broker?

#2 – I received 30 pages of a couple years of tax returns so this broker is going to let the buyer decipher the financials. Look at the bottom line of your tax returns; is that how much money you really make? But that is what the buyer will see!

What is a Recast

Tax returns are really prepared to minimize your tax liability so the objective of recasting your financials is to show the true income/benefit of the business by adjusting any one time expenses, owner compensation, fringe benefits, depreciation, amortization, interest and other items.

Owner Salary

This is typically the most common as we will add back the salary of the owner. Compensation of family members is also common and would be added back if they are not actively working in the business.

Fringe Benefits

There are a plethora of fringe benefits that I have seen and are a true benefit. Some of the common fringe benefits are the business is paying for personal cell phones, personal gas and vehicles, health insurance, travel and entertainment. Some of the more grand fringe benefits I have seen are airplane fuel, a muscle car collection, groceries, travel and more.
Unless specifically asked and pointed out how would a buyer find these items and see the true income of the business.

Depreciation

Typically depreciation, or at least a portion is added back in to the income as a non cash expense for small businesses which we use the seller discretionary earnings (SDE) to show income and benefits.

Interest

A business is typically sold free of any liabilities meaning the interest expense is added back since it will not be a continued expense.

Non-Recurring Expenses

We will typically add back one time or extraordinary expenses if it is non recurring or not related to the business. In other situations we may add back certain purchases such as a vehicle and properly amortize it rather than taking a large one time hit. Other typical add backs may be legal fees, moving expenses, expanding operations, purchase of assets or many other items.

As a seller a larger income will usually mean a larger selling price. The add backs should be valid and provable as to legitimize the value of the business.

List your business with me and you will not have to worry about what your broker is or is not doing but rather focus on your business while I focus on selling it for the true value.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

As a business seller with a business on the market, you can feel at times like you are constantly having to reveal the world to complete strangers, an uncomfortable feeling at best.

When you accept an offer from a potential buyer, be prepared. The stage you will enter at this point is known as due diligence, and it is a buyer’s chance to pull back the curtain and really get to know the business from the inside out before they decide to buy it.

This part of the process can be unnerving for a seller, as this buyer will have access to all kinds of financial records like tax returns and contracts, and in some cases client lists and key employees. To get your business sold, you will need to give a buyer access to the information that is going to make them feel like your business is the right choice.

This part of the sales process can be uncomfortable, but there are a few things you can do to ease your discomfort with exposing so much information. First, discuss your apprehensions with your business broker. They will be best equipped to answer your questions about information disclosure.

Next, you can work with your broker to set up stages of disclosure (if your type of business permits this kind of set up) where a potential buyer can have access to less confidential information first, then (if they decide to go ahead with the deal at each step), they can see more delicate information, like a client list. This way, if the buyer decides to pull out at an early stage, they haven’t seen your most confidential business material.

In some cases, at the end of due diligence the buyer will decide for whatever reason not to go through with the deal. What can you do about this person who now knows absolutely everything about the inner workings of your business?

Well, for starters anyone who gets to the due diligence phase has long since signed what is known as a non-disclosure agreement. This agreement allows you as the seller to take legal action against this former potential buyer if they disclose any information about your business that they weren’t supposed to. The non-disclosure agreement process also allows you as a seller to define individuals you don’t want to disclose to – like a competitor, for example. Be sure to discuss the non-disclosure agreement process with your broker if you are at all uncomfortable.

Are you a business seller who is completely uncomfortable with disclosing your business information to a person who may not even buy it? Do you have questions about the legal protections a non-disclosure agreement can give you? Ask us! Please leave us a comment or question and we will be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com