Selling Your Business? How To Survive The Low-Ball Offer



If you are trying to sell your business, you may already realize what a stressful process this can be. You have to assemble all of your records, answer a constant stream of questions, deal with new requests from prospective buyers – all while trying to maintain your business in good working order.

 

You’ve worked hard at your business – invested time, money and energy. To you, the value is more than money. The business is an extension of your life.

 

The problem is, to any buyer walking through the door your business is just one of many, and the numbers on the bottom line mean more than anything else.

 

What happens when these vastly different views of a business collide? In some instances the result is a low-ball offer, where a buyer makes an offer so low a seller won’t even consider it, and oftentimes makes a seller unwilling to even negotiate with that buyer.

 

The low-ball offer is just a reality of having your business on the market, so if you are trying to sell your business, you’d better be ready to get one – and also be ready to keep your composure if it happens.

 

Many sellers see a low offer as a personal offense, but you have to remember that the only person who sees your business the way you do – is you.

 

You really shouldn’t be insulted by low-ball offers. Be happy you got an offer at all. The reality of the business market is your final selling price will be somewhere between your initial listing price and the first offer from a buyer. If you listed your business at the absolute rock-bottom price you are willing to take, that is a mistake, as is demanding that you get a full-asking price or there’s no deal. You need to be realistic and you also need to have thick skin.

 

 

Any offer, even a ridiculously low one, can be a starting point for negotiations.

 

Low-ball offers are typically from two kinds of buyers. The first are tire-kickers who low-ball sellers just to see if they can get a business for a steal. Most of the time this type of buyer never actually buys a business, they just shop around indefinitely. You will know if a low-ball offer is from this kind of buyer if the number is obscenely low, if the reason for the low offer is from way out in left field or if they have no explanation for the low offer at all.

 

The second type of buyer who makes a very low offer is a buyer who is looking for a deal. They low-balled you on the value of your business because they feel that you need to prove your asking price, but they want to get the deal rolling. For this type of buyer it is important to remember that your listing price is a jumping off point, not a non-negotiable price tag.

 

No matter what kind of offer comes in, consider it a step in the right direction. You will quickly be able to figure out if a buyer is serious or is just shopping around.

 

Are you a seller who wants to know how to handle a low-ball offer? Do you have questions about what makes an offer reasonable or how to begin negotiations? Ask us! Please leave us a comment or question here.

 

 

 

 

Michael Monnot

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

http://www.InfinityBusinessBrokers.com


Need Business Buying Help? Why You Need A Business Broker



If you are considering the entrepreneurial leap, you will find many people who are ready to give you lots of helpful (and unhelpful) advice. Friends, colleagues, attorneys, real estate agents and the like – but by far the best person you can have by your side during the business buying process is an experienced and qualified business broker.

 

 

When I called about a business, there was already a broker involved – so why do I need my own?

 

Business brokers don’t represent the buyer or the seller in a transaction, they represent the transaction itself. That being said, the broker who you speak to when inquiring about a listing is someone who knows and has a relationship with the seller – and it is their job to get the business sold. Would you be willing to take the advice of an adviser who only knows about the seller and the business and nothing about you? Probably not. Your own broker is going to go through the discovery process with you – meaning they will find out what your goals are for business ownership, what you are looking to spend, where you would like the business to be located – and then using that information they will help you narrow down the choices of businesses currently for sale. The point here is you need to deal with a broker who knows something about you too.

 

What if my broker matches me with one of his own listings? Is it a bad idea to have him represent both sides of the deal?

 

If your broker knows you and your goals, and has the perfect business to meet those goals, then no – it wouldn’t be a bad idea for your broker to represent both sides. Again, brokers represent the transaction, so as long as you and the seller are both comfortable working with the broker it shouldn’t be a problem. In many cases having only one broker in the mix can actually make the transaction much smoother.

 

What did you mean by “experienced and qualified business broker”?


Our industry is a tough one, and while many budding business brokers come onto the market – most never make it to a closing table. We also have lots of “moonlighters” – people whose professional expertise is in a completely different field, but they sell businesses “on the side”. For the most part these “moonlighters” are real estate agents and attorneys, but we’ve even seen neurologists and dentists give business sales a go. If you are trying to buy a business, you want someone who knows what they are doing by your side. If you needed a cavity filled, you wouldn’t call a realtor – so make sure any broker you work with is actually a broker. Then ask them about their experience. Are they brand-new to the industry? If they are, they will likely have an impossibly hard time getting seasoned brokers to cooperate with them, they will be unaware of the common pitfalls that can derail a business sale and they won’t be able to guide you properly through the process.

 

When you are ready to buy a business, do yourself and your goals a favor by employing the services of the best adviser possible – a qualified and experienced business broker. 

 

Have you shopped around for a business but haven’t found what you were looking for? Is the “broker” helping you really a “moonlighter”? Do you want to know what kind of business could help you meet your goals? Ask us! Leave us a comment or question and we would be happy to help you on your journey to business ownership.

 

 

 

 

Michael Monnot

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

http://www.InfinityBusinessBrokers.com

 


How Much? Business Pricing And The Buying Process



How much money do you need to buy a business?

 

This is a very common question, and the answer usually surprises first-time buyers.

 

Business prices can vary greatly, even within the same industry. If you are interested in buying a restaurant, for instance, you could get a small neighborhood sandwich shop for $50,000 – or you could shoot for a large waterfront steakhouse that could run you $500,000.

 

It might help to first look at how businesses are priced and then to look at how first-time buyers (and all buyers) actually buy businesses.

 

How are businesses priced?

Businesses are priced based on a few factors – namely how much money they earn (cash flow), the value of things like vehicles/equipment/furnishings and the value of the current inventory. There are other factors that also play into pricing, like how much comparable businesses have recently sold for, how many years the business has been open – the list goes on. When you first enter the business market it is a great idea to use the advice of an experienced and qualified business broker because they will be able to both explain how a particular business has been priced and also advise you on whether the business is worth what the sellers are asking.

 

How do I actually buy a business?

Like almost all industries, in the business world cash is king. Most first-time buyers, however, are not coming to the market with large amounts of cash to spend . If you don’t have a ton of cash available then a very large manufacturing business that lists in the millions is probably not for you. There are, however, smaller businesses that can run $20,000 or $30,000. What you end up spending will depend on what type and size of business you both like and can afford.

 

What if I have almost no cash available, can’t I just get financing? Yes and no. Buying a business is nothing like buying a car. You can’t walk in with no money down and walk out with the keys. There are a few financing options available to business buyers, but it is important to understand from the start that you will need a fair down payment for any business with any financing option. No one is going to finance 100% of a business purchase.

 

There are a few more traditional lending options – like bank loans – but for the most part you will have an incredibly hard time getting any bank to finance a small business purchase. It’s just too risky and many banks are still gun-shy in the wake of the recent recession.

 

The Small Business Administration (SBA) has some funding available, but much like traditional lending these loans are often hard to get. A business must meet a rather stringent set of criteria and then the buyer themselves will also have to meet SBA’s buyer criteria.

 

The last and most common financing option is something called seller financing. In this scenario the seller finances a portion of the purchase price to be paid back by the buyer over time. Let me repeat this – the seller finances a portion of the purchase price – if you are looking to this option then you as a buyer will have to bring some capital to the table in the form of a down payment. For a seller a large down payment shows good faith that a buyer is serious about getting to a closing table. For buyers, a seller who is willing to hold a note like this is a good sign. It means the seller has confidence in the future of the business.

 

Regardless of the way you end up buying a business, be it cash or financing, the most important point is to have realistic expectations and seek some sound advice.

 

When you first talk to your business broker, be honest about the amount of capital you will actually be able to bring to the table. Dishonesty here will eventually come out as you will be asked to prove how much capital you have as a deal progresses. Also be honest with your broker about what you are looking to get out of buying a business – if you just want to be your own boss, you want a flexible schedule or you want to follow a passion you’ve always had. With the amount of money you have and the goals you have in mind an experienced broker should be able to find you businesses that will meet with both what you have and what you need.


Are you a first-time buyer who has more questions about how businesses are priced? Would you like to know how much of a down payment you would need? Please ask us! Leave a question here, and we would be happy to help.

 

 

Michael Monnot

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

http://www.InfinityBusinessBrokers.com


Why Now? And The Other, Deeper Questions Buyers Should Be Asking Sellers



 

When you start looking at businesses to buy, you will probably have a list of questions you’ll want answered by the sellers of the businesses you’re considering. The typical questions, like “why are you selling” and “how long have you owned the business” might seem pivotal.

 

However, there are a handful of more unconventional questions you should be asking that you may not have considered.

 

Why now?”

The “why are you selling” question is an important one, but another very important question needs to be based on the timing of the sale.

 

Sometimes the answer to both questions is the same – like in the case of a seller who is putting the business on the market because a sudden health emergency will prevent them from running the business. This scenario would not indicate issues with the business, rather personal issues with the current owner.

 

If there is not an impending emergency forcing the sale, then the answer to the “why now” question will be critical in determining the true health of the business.

 

If a business appears in good shape, then the “why now” answer should be something along the lines of “well, we’ve reached pivotal markers in the long-term exit plan for this business, and we are ready to move on to other ventures”. The seller in this situation decided long ago on the future sale of the business, and has been readying the business in that time.

 

If the answer to the “when did you decide to sell” question is “well, we decided yesterday” – then you should dig much deeper into the business, as a sudden urge to jump away from a perfectly good business should seem suspect.

 

Where did your listing price come from?”

For a seller the evaluation of their business can be tough. They’ve invested countless hours, large amounts of money and tons of energy – and placing a monetary number on something so life encompassing can be nearly impossible.

 

A listing price should be based on realistic terms, like the money the business generates and the value of the equipment – not on the emotional value or the sum of every penny the seller has ever spent on the business.

 

When looking at businesses be aware that some sellers find brokers who are willing to list the business for whatever the seller wants, no matter how ridiculous, just to have the listing. The prices of these businesses will be highly inflated and there will be no justification.

 

If you had unlimited resources, what changes would you implement to grow the company?”

Sometimes businesses remain stagnant and have limited growth because of lack of funds, sometimes it is because of the apathy of the seller.

 

Any seller who has an eye on the future and an eye on growth will already have considered this question and have an immediate answer.

 

If a seller hesitates or can’t come up with a reason, then they may not have been conducting their business with an eye on the future. Not good news for a new owner taking the wheel.

 

When you are looking for a business to buy, don’t just ask the basic questions. Questions like the ones above delve deeper into the motivations and actions of a seller and can tell you volumes about a business.

 

Are you a business buyer who would like to know what other questions you can ask sellers to delve deeper? Would you like to know more about what answers to these types of questions might tell you? Ask us! Please feel free to leave a comment or question here, and we will be happy to help. you with any questions in your business search.

 

 

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




Search



Recent Posts

Categories

Archives

Tags