The Big 3: What Business Sellers Need To Be Ready For – Part 3, Emotional Readiness



Preparing your business and yourself for the transaction process can be tough. It will take a fair amount of work on your part, the right help and the right mindset. Knowing what’s ahead of you can also be a huge help, so this is part three of a series of three articles that will address the three biggest aspects of your business sale that you need to be ready for – hopefully long before you are in the thick of the transaction process. Potential issue #3? Emotional readiness.

 

beautiful 35 year old woman stands in front of the window

 

Emotional Readiness

This aspect of selling your  business usually surprises owners, but selling your business means a very big change in your day-to-day life, and this massive change will come with it’s fair share of emotional upheaval. This typically presents in a few ways.

 

Cold feet.

Think you got cold feet when you got married? Selling your business is as big, if not a bigger life change than walking down the aisle, and you need to be ready for the last minute panic that you may feel as your closing date looms near. Many owners are also apprehensive because selling their business means they will be very much unemployed for the first time in recent memory.

 

Letting go of control.

Your small business is just that – it’s yours. The type-A, slightly control-freak part of you that made you a very successful entrepreneur will probably have a few issues with handing over the keys to your blood, sweat and tears to someone else. Try to remember that the business is just a business, and when the day comes to hand over the keys you aren’t letting go of a piece of yourself – rethink it as handing over your daily workload so you can focus on future endeavors.

 

Is this enough money?

It is incredibly difficult to put a monetary value on a business that you’ve invested countless hours, a great deal of money and a big chunk of your life into – but if you want any kind of return on all of that investment, deciding on a number will be very important. The difficulty of this decision can create a number in an owner’s mind that is far greater than what reality can provide, and as such an owner who refuses to budge from this dream number will likely end up not selling. The other issue that arises is after the negotiations have happened and a seller has a few days before the closing table to think about the deal that’s just been made. Some come back suddenly wanting more money, but all this last-minute second guessing does is kill the deal. No buyer is going to be willing to negotiate for more money after both sides have already agreed. If you want your sale to end successfully, make the final decision and then stick to your word.

 

How should a seller deal with the emotional side of selling their business? First and foremost, you need to accept the reality that you will have to deal with the emotional side. Simply knowing that emotional upheaval is coming can greatly help to mitigate the stress it might otherwise cause. Second, instead of focusing on the negative, plan your post-ownership life. Shift your focus to the future. What are your plans for the proceeds of your sale? Retirement? Reinvestment into another venture? Travel? By keeping yourself busy with thoughts of your new life it will be far easier to let go of the old one.

 

Are you a seller who hadn’t considered the emotional toll of selling your business? Have you sold a business and would like to share your experience? Would you like to know what kinds of investment opportunities might be available for the next chapter of your life? Feel free to leave us a comment or question here.

 

Want to read Part 1, Time To Prepare? Click here.

Want to read Part 2, Think Like A Buyer? Click here.

 

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com


The Big 3: What Business Sellers Need To Be Ready For – Part 2, Think Like A Buyer



Preparing your business and yourself for the transaction process can be tough. It will take a fair amount of work on your part, the right help and the right mindset. Knowing what’s ahead of you can also be a huge help, so this is part two of a series of three articles that will address the three biggest aspects of your business sale that you need to be ready for – hopefully long before you are in the thick of the transaction process. Potential issue #2? Thinking like a buyer.

 

Confused young man

 

Think Like A Buyer

Like all of the issues a seller must face when putting up their business for sale, looking at your business through someone else’s eyes can be tough. You love the shade of blue paint you picked for the walls, it was your mom’s favorite color. A buyer, however, doesn’t care that you used paint to memorialize your mother. All they see is the paint by the window is faded from the sun and that the whole place needs to be repainted, maybe even gutted.

 

Your business is your baby, and it can be really hard to see it in an objective manner. However, if you really want to sell, this objectivity will be very important to the success or failure of your sale.

 

First take a good, hard look at the physical appearance of your business. Does it need a fresh coat of paint? Is the furniture beat up and stained, or is it in good repair? How clean does it look and smell? Is the carpet sticky? One of the major complaints prospective buyers make is about the cleanliness of a business the first time they see it. If your business is filthy and/or looks unloved, then that bad first impression will be very difficult to overcome, even if you have fantastic numbers. Keep your business clean, and give it a thorough once-over before you put up for sale.

 

Next, what does your equipment look like? Does it all work? Are there lightbulbs out? Is the handle on your food cooler falling off? Is only one burner on your six-burner stove actually working? Buyers will see broken equipment or equipment that has been poorly maintained as a reflection of how you probably run all of the other parts of your business, even if you are on top of everything else. Keep your business equipment in good shape and fix what’s broken long before you have to show it to a buyer.

 

Now that you have the aesthetic parts of your business in order, you need to focus on your documentation. Nothing is more frustrating or looks more suspicious to a buyer than a business seller who can’t produce requested documentation in a timely fashion. If it takes you two weeks to assemble a copy of your lease and a copy of last year’s tax return, then it certainly looks like your record keeping is a mess. Stay proactive and organized with all of your business documentation so requests can be quickly answered and the transaction process will go much more smoothly.

 

Once you decide on a listing price, you will need to be prepared for the reality that your business will probably sell for less than asking. Your listing price is a starting point for negotiations, as is the initial offer from a buyer. A buyer isn’t going to offer their top dollar on the very first try, so again thinking like a buyer will be critical. What would you offer if you were in their shoes and had only the documentation you’ve provided to go on? Ask for and listen to their justification of the amount they offer, as each point may be a point of negotiation. While it is true that some buyers are just kicking tires and submit extremely low offers just to see if you’re desparate, most serious buyers aren’t trying to insult you or your business. They’re just trying to get the biggest bang for their buck.

 

Thinking like a buyer can be tough when we’re talking about a business that you’ve been personally invested in for so long – but stepping out of your seller’s role and looking at your business, the negotiations and the entire process through a buyer’s eyes will help a great deal to ensure the success of your sale.

 

Are you a seller who’s seen nothing but extreme low-ball offers? Do you have questions about what your business and the numbers look like with an objective eye? Are you tired of just being told what you want to hear and are looking for a successful chance at selling instead? Please feel free to leave us questions or comments here, we would be happy to help.

 

Want to read Part 1, Time To Prepare? Click here.

Want to read Part 3, Emotional Readiness? Click here.

 

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com

 


The Big 3: What Business Sellers Need To Be Ready For – Part 1, Time To Prepare



Preparing your business and yourself for the transaction process can be tough. It will take a fair amount of work on your part, the right help and the right mindset. Knowing what’s ahead of you can also be a huge help, so this is part one of a series of three articles that will address the three biggest aspects of your business sale that you need to be ready for – hopefully long before you are in the thick of the transaction process. Potential issue #1? Time to prepare.

 

Vacation time. Alarm clock on the sand

 

Time To Prepare

It probably goes without saying that the more prepared you are, the more likely you are to have a successful sale. In an ideal world, you would have a well thought out exit strategy from day one of owning your business, and you would just intuitively know when the best time to implement that exit strategy will be.

 

Unfortunately for many business sellers, life has a habit of getting in the way. Many business owners find themselves stuck in a position that forces them to sell, and sell suddenly. Perhaps a family member who lives out of state has a medical issue that warrants a sudden relocation. Perhaps the owner themselves has a personal or medical issue that requires more of their time and energy than the business can give. Whatever the reason, a sudden sale puts a large amount of pressure on a seller to accept a deal they would never have considered in better times. The added work necessary to get a business deal to the closing table also piles on a workload that a personal upheaval will make difficult.

 

How do you avoid this stress-laden catastrophe? Stay prepared. Most in the business transaction world would tell you that you should ideally give yourself at least a couple of years to prepare your business for sale before you list, so a proactive business owner can stay ahead of the game by preparing their business today in the event that they should suddenly need to sell. This proactive approach will alleviate a huge amount of stress when the time to sell does come, as well as set you and your business up for a successful sale.

 

Some things to prep:

 

Your taxes.

You taxes should always be up to date, your tax bills should be paid (including things like sales tax) and you should both know where your tax documentation is and be able to/already have good copies made. Poorly photocopied and incomplete tax returns are the norm in the business-for-sale world, and all this sloppy documentation does is reflect poorly on your abilities as an owner and poorly on your business in general.

 

A P&L

You should have a current Profit & Loss statement (P&L) ready to be printed off at any time, as throughout your listing you will need to provide your broker and any potential buyers with current numbers.

 

Your documentation.

Small business owners are famous for the box ‘o paper stuffed under the desk or in a back storeroom, but those records really need to be in an easy to read form. If you need help assembling all of your other business documentation, seek the help of a business broker or the assistance of a CPA who is familiar with business sales. Once your records (payroll, expenses and the like) are in a good format, all you need to do is add any future records. It will make your numbers easier to prove, and will go a long way in justifying your listing price to a curious buyer.

 

Your lease, contracts, etc.

You will need a decent copy of your lease and any contracts you have with vendors and suppliers, so know where this documentation is and have it ready to go. You should also look at your lease to see if there is a transfer clause that would allow a new owner to take the lease over for you in the event of a sale. If you need help figuring out what the lease should say, talk to your business broker.

 

Any preparation you do now will be less work you have to do later, so don’t wait for an impending sale to get your ducks in a row. Do yourself and your future stress level a favor and handle the prep work now.

 

Are you a business owner with little to no exit strategy to speak of? Do you have questions about what you can do to be ready, even if selling your business is 5, 10, 20 years down the road? Ask us! Please feel free to leave us a comment or question here, and we would be happy to help.

 

Want to read Part 2, Think Like A Buyer? Click here.

Want to read Part 3, Emotional Readiness? Click here.

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com

 


Does Your Business Really Need an Operating Agreement?



By Guest Contributor Jo Ann M. Koontz, Esq., CPA – www.koontzassociates.com

 

If you’re launching a business in 2015 you probably have an overflow of ideas, priorities, and questions running through your head. You might be overwhelmed by everything you need to do, or you might be wondering what the next step should look like. A common question we hear from our clients is:

 

Does my business really need an operating agreement?

 

An operating agreement dictates the management and operation of a limited liability company (LLC). It could include details about profit and loss sharing, the management structure of the company, and procedures for removal and addition of new members.

 

We understand why you may want to skip this step. You probably have a great relationship with your business partners and you’re all on the same page about how you want to move forward with your business. What you may not realize is that an absence of an operating agreement means you have to run your business the way the State of Florida sees fit. This could cause some major headaches.

 

Florida law has very specific guidelines regarding the distribution of profits and losses among company members. It’s calculated based on each member’s capital contribution, which could be in the form of cash, services, or property. Each member must also follow tax liability guidelines, regardless of whether or not the profit or loss is actually collected. If your company distributes profit and loss differently but you don’t have an operating agreement in place, members could become liable for tax payments on income they never actually received.

 

Florida law also requires a LLC to be member-managed, which means that each member’s power to make business decisions is legally proportionate to the member’s percentage of profit and loss. If you don’t have an operating agreement that outlines decision-making procedures, you could unintentionally give individuals authority to make decisions that they were not intended to make.

 

These are just a few of the possible obstacles your business could encounter without an operating agreement in place. Generally speaking, your operating agreement should cover the following:

  • Specification of each member’s ownership percentage
  • Rights and responsibilities of each member
  • Distribution of profits and losses
  • Voting rights
  • Management structure
  • Meeting requirements
  • Transitional procedures for the removal, addition, or sale of members and their respective interests

 

When you prepare an operating agreement, you should always consult with an attorney who has experience and knowledge in the formation of new business entities. The future of your business depends on the navigation of legal nuances involved in creating the business, so make sure you’re not missing any important details.

 

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Jo Ann M. Koontz, Esq., CPA

Koontz & Associates, PL
1819 Main Street, Suite 910
Sarasota, FL  34236
Phone 941-225-2615
Fax 941-951-2618
joann@koontzassociates.com
www.koontzassociates.com

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com


From Business Owner to Business Seller – Get Ready



You may be an experienced business owner, but getting a business all the way from listing to closing is much more difficult than you think, especially if your timetable to sell is less than favorable. Great business owners and successful business sellers need a completely different mindset, so knowing what’s ahead and then staying ahead of the game will be critical to the success of your sale.

 

thinking businessman in suit making decision

 

The Under-Prepared

Unfortunately many sellers end up putting their business on the market for unforeseen personal reasons and as such the impending sale is happening on a sped-up time table that no one is ready for. Most in our industry would suggest making pre-sale preparations several years before your planned exit from the business, but for many small business owners this time table isn’t realistic. If having the adequate time to prep is not in the cards for you, you can always stay ahead of the game by staying prepared should the unforeseen happen.

 

Handshakes and Horizontal Filing

One of the major preparation issues with businesses is on the paperwork side. Most small business owners are not organization gurus, and as such their business documentation is typically scattered between their home and office, jammed into unlabeled boxes or in the case of “handshake agreements” never existed at all. When the time comes to sell, this paperwork issue can quickly turn into a nightmare. Staying ahead of the game by keeping your business documentation in order is incredibly important if you want buyers to be able to see your business as it truly is. Justification of your asking price will be far easier if your paperwork ducks are in a row.

 

Listing Prices and Reality

While we’re discussing asking prices, let’s talk reality. Your business might be solid, but in the business market it’s only worth what someone is willing to pay for it. Since in many cases you end up selling in a time frame that isn’t ideal, you need to understand that the current market will have something to do with what your listing price should be. You can absolutely go out and find a business broker who will tell you what you want to hear and let you list your business for whatever you want – but a successful sale is far more likely if you price your business correctly right out of the gate. It can be tough to put a number on all of the years of time, money and energy you’ve invested, so seek (and listen to) the advice of a knowledgeable broker before you decide on an initial listing price. Your listing price should be based on the numbers your business actually produces and should be in line with what comparable businesses actually sold for. If you have a good business and a good listing price, you will likely end up within about 10% of that number. If your listing price is ridiculous and not well supported, you probably won’t be able to sell at all.

 

Whether you weren’t planning on selling and now find yourself in the listing process, or if you think you have no plans on selling in the near future – it will be important to the successful (and unplanned) sale of your business if you stay ahead of the game.

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com

 

 


Abide Agency Insurance Solutions – Getting the Best Value for the Insurance Dollars You Have to Spend



By Guest Contributor Steve Chesnut – www.abideagency.com

 

Abide Agency provides insurance policies that protect individuals and businesses from financial loss resulting from automobile accidents, fire, theft, storms, and other events that can damage property. Business Insurance, Property Insurance, Casualty Insurance and Workers’ Compensation Insurance are the main coverages for your business. There are many other coverages but those 4 are usually the required coverages. In Florida if you have 4 or more combined full time/part time employees you are required to have workers’ compensation. If you have a construction-based business and have one or more employees you are required to purchase workers’ compensation.

 

Abide Agency Insurance Solutions represents a number of insurance companies, or “carriers”, and sells the products that most appropriately meet the needs of their clients.

 

When getting quotes for your new business, you want coverage, but do not want to pay more for your insurance than you did for the business. If your insurance premium is based on sales or payroll, base your new insurance on realistic numbers. This is especially true for restaurants. Restaurant premiums are based on the insurance rate per $1000 of sales. If you underestimate there is a good chance at the end of the policy period you might owe some additional premium. If you estimated $500,000 in sales at the rate of $4.25 per $1000, but you actually did $600,000 you would owe an additional $425. If you estimated $500,000 and only did $400,000 you do not get any money back. Better to estimate low and owe than to overpay.

 

This is especially true in coastal areas where there is the possibility of a slowdown in business due to storms. Using a knowledgeable agent is really a key in getting the best value for your insurance dollars.

 

With workers’ compensation your business has the option of having their own policy or going with a PEO (Professional Employer Organization). With the PEO they handle the payroll, taxes and required workers’ compensation. In this relationship the PEO must have the employee application before the employee is covered. The other option is your own workers’ compensation policy and doing your own payroll or using a payroll service that does the payroll and taxation. With your own workers’ comp policy all employees are automatically covered for work related injuries. Also with your own policy you are establishing a workers’ compensation history that could lead to discounts and safety dividend questions.

 

For any business insurance questions please contact us at Abide Agency Insurance Solutions.

 

abide agency logo

Steve Chesnut

Steve@abideagency.com

239-841-7526

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
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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