buy a business Archives - Page 8 of 29 - Infinity Business Brokers

Published October 24, 2022

This one probably seems pretty obvious. Two people who are essentially strangers are trying to put together a deal for the sale of a small business from one party to another. There are seemingly endless moving parts and points to negotiate, so just getting to a closing table sometimes feels like it takes a herculean effort. All throughout this process everyone needs to try their best to stay objective and keep their cool – but with someone’s blood, sweat and tears being exchanged for someone else’s hard earned money it can be tough to stay emotionless and not be offended.

Then someone starts talking politics.

We all know how divisive political conversations can be. They upend family gatherings and have turned into brawls on the street. Why are we talking about them? A simple political comment can snowball and end a deal.

You don’t have to be madly in love with the person on the other side of your transaction. What you do have to do is get along with that person long enough to put a deal together, close that deal and then go through a training period on the other side. The relationship between a business buyer and a business seller is so delicate intermediaries (business brokers) are needed to keep the deal on track and act as a buffer between the parties involved.

Why then would a person trying to make a deal happen for themselves throw a political grenade on the whole process? Just don’t. It’s a bad idea.

Everyone is entitled to their own political opinions. What you don’t need to do is share those opinions in an already tenuous situation that has big ramifications if the two parties reach a point where they can no longer communicate.

Ok, but what if I’m not the one who is always bringing up politics?

If you really want your deal to happen your best bet is to ignore those comments from the other side. Change the subject, walk away and communicate through your business broker as much as possible.

Are you buying or selling a business and want to know more about how business brokers can act as a buffer in a business transaction? Have you been a part of a business deal that went south because of a political clash and have a story to share? Please leave questions and comments here.

Michael Monnot

Thinking About Hurricanes: Buying A Business In Florida

Posted in Become a Business Owner, Buyers Articles

Published October 17, 2022

Hurricanes. They’re an inevitability of living in Florida (or anywhere on the Gulf or East coast of the United States for that matter). If you’re in the market to buy a business, how much should hurricanes factor into your decision? It depends.

If you’ve decided that Florida is where you’d like to end up then hurricanes will just be something that happens. Your house will contain hurricane supplies and you’ll watch the advisories from the National Hurricane Center whenever a storm approaches.

If you are considering businesses, then factoring in hurricanes will depend on where you’d like the business to be and how your business might be affected by prolonged power/utility/internet outages. For instance, if you are looking for a beach bar on a barrier island you’ll need to be sure you consider that a bad hurricane that makes landfall where you are might cause catastrophic damage to your business. If you would be more comfortable with a business located in a more inland zone, you’ll still need to see where your business location stands in terms of evacuation and flooding zones. You need to think about how you will keep your business functioning if you lose power, water and/or internet access for days or weeks on end. If you’re considering that same beach bar, what is your plan if the business loses power and you can’t run the refrigerators that hold your inventory? If you can’t run your point-of-sale system without the internet, will you just revert to paper accounting or will you have a hot spot on standby? The point here is although hurricanes are typically an infrequent problem – the damage they can cause is something you need to think about when you are choosing a business based on location (and you need to consider your game plan if a storm comes you way).

When a storm does approach, you should be ready – long before the weather gets ugly. If your business requires power to run refrigerated storage systems (for example) you should invest in an on-demand generator system long before your first hurricane season. It can be difficult, if not impossible, to gather and install hurricane protections for your business if you wait until everyone is panicking and the store shelves are empty. If you think you want to secure windows with shutters or wood, get those installed or ready to be quickly installed outside of hurricane season. You also need to prep your business early as you will need to give your employees time to storm prep their homes before the storm rolls in.

You should also ensure you have the proper business insurance should the worst happen. You will need insurance for wind and water/flood damage, as well as enough coverage to replace your equipment, inventory, etc. should you need to or want to rebuild.

You should also be ready for the cascade of cancellations that typically happen when the forecast cone falls on your area, whether the storm ends up impacting you or not. You should also come up with a set of protocols – like when you’ll close up shop, how you’ll secure the business, what you’ll do post-storm and then go over that information with employees so everyone is on the same page at the start of every hurricane season.

Should hurricanes dissuade you from buying a business in Florida? No, not at all. Like earthquakes in California or tornadoes in the Midwest every area has it’s own unique natural disasters to consider and prepare for. Choosing a business in a hurricane prone area probably means that you’ve picked a business where there’s heavy tourist traffic (like the beach bar example) – so you need to weigh the potential for all the money you can make with the preparations necessary should a hurricane roll in.

Are you thinking about buying a business and are worried about the potential for hurricane damage? Would you like to know more about what Florida businesses can do to prepare for storms? Please leave any questions or comments and we would be happy to help.

Michael Monnot

Buying/Selling A Business? When To Rebrand

Published October 10, 2022

What’s in a name? If we’re talking business names, then your name is your brand – the symbol of your reputation. As a business owner you should always have your eye on growth. Growth of your customer base, growth of your bottom line and perhaps most importantly growth of your reputation.

What if that reputation has seen better days? Whether you’re currently a business owner who is considering selling or a buyer looking at businesses to purchase a very important consideration is whether a rebranding is in order.

Business Sellers:

One of the first things a prospective buyer will do is pop your business name into an internet search engine and see what comes up. If you are thinking about selling your business, then this is something you should do for yourself long before you list your business for sale. What does your reputation look like? What does the community at large think of your business?

If your reputation isn’t the greatest (but is salvageable), then you need to work on changing that perception of your business. Take reviews and comments from former customers and try to make the changes that would turn any bad reviews into good ones. Many review sites will let you respond to reviews, and you should – to both the good and the bad. Customers want to know that their thoughts are being heard, so acknowledge anyone who took the time to review your business. Don’t attack customers with complaints – instead let them know they were heard and that you’ve made changes that would result in a better experience if they give you another chance.

If your reputation is atrocious – then maybe a rebranding is in order. This might be the path you need to take if you’ve lost the majority of your customer base. However, renaming and relaunching your business only works if you make major changes. A new name on the sign and business as usual isn’t going to help. Update menus or inventory, swap out staff, change operating procedures – you get the idea. Revamp your business and then let your new, improved numbers shine when you list your business for sale.

Business Buyers:

If you are a buyer, then you have to decide whether or not your will keep the business name when you take over. If the business has a good reputation within the community and you won’t be making any major changes (like turning a pizza place into a fine dining seafood restaurant), then you really should consider keeping the name so you can continue the brand presence within the community.

If the business isn’t well liked, then a name change is a great way to let the community at large know that big changes have taken place and create some curiosity that may bring customers back in the door. Just be careful with the name you choose. Your business name should make it clear what the business does, as well as give a good impression of the business at first glance.

Are you a business seller who wants advice about improving the reputation of your brand before you sell? Are you a buyer who wants to change the name of a business you are considering? Please feel free to leave us a comment or question here, and we would be happy to help!

Michael Monnot

Seller Financing – A Business Buyer’s Best Friend

Posted in Uncategorized

Published October 3, 2022

If you are considering buying a business, you may have looked at prices of local businesses during a cursory search and wondered how you would raise the funds to buy one. In the vast majority of small business sales seller financing will be involved, which is great news for business buyers.

What is seller financing?

Seller financing happens when the business seller finances a part of the deal, essentially loaning the buyer a part of the purchase price.

Why does a buyer need to consider seller financing? Many buyers who are new to the business market initially look for traditional means of financing, like a loan from a bank. Unfortunately banks are often unwilling to finance small business deals.

Why? A bank typically only lends money if they are sure they will be repaid and if there is collateral equal to the amount loaned they can take possession of in the event of a default. A house fits this mold quite well, as a home buyer must prove steady income before getting a loan and the house itself will serve as collateral because the bank can sell the house without having to take a loss (because the home will not lose value simply because the ownership changed).

This is not the case with a small business. When a small business changes hands, in the eyes of a traditional lender the very experienced management/ownership is being replaced by new (and therefore inexperienced) management/ownership. In addition, the value of a business is not just found in the tangible assets alone, so a bank would not be able to recoup any losses by selling the business if a new owner defaults on their loan.

What this means for the business market is traditional financing is highly unlikely, so if a business seller wants to get a deal done they can either wait for the ever-illusive all-cash offer, or they can offer to finance part of the deal.

What does a deal using seller financing look like? The answer is it really can look like almost anything. Typically the buyer must come with a substantial down payment, and the deal is structured so in the event of a default on the financing, the seller takes back the business. Many seller financing deals also include provisions where inventory must be kept at a certain level (so the seller wouldn’t have to replace the inventory after taking the business back).

Why is seller financing great for buyers? First and foremost, it allows buyers to buy businesses that would be beyond the reach of those without a substantial amount of cash. Second, it forces a seller to keep some “skin in the game”, meaning the seller has a vested interest in keeping the business going and profitable long after the business changes hands, otherwise they won’t get paid back. Sellers who are willing to offer financing will typically be much more helpful for a new owner with regards to training and motivated to build the business with an eye on the future.

If you are a buyer interested in looking at businesses where seller financing is an option, talk to your business broker. They will be able to find a business that will fit with your goals.

Are you a buyer who has more questions about seller financing? Would you like to know what a seller financing deal would look like for you? Please feel free to leave us a comment or question, and we would be happy to help.

Michael Monnot

Do They Vacation? A Business Buyer Must-Ask Question

Posted in Buyers Articles

Published September 19, 2022

Sure, there are the big and basic questions you should ask when looking at a business to buy – but there are also some more unusual (but very telling) questions that will help you figure out if this really is the right business for you.

What do we mean by “the right business for you”? Entrepreneurship is tough, and along with a decent amount of personal drive a successful entrepreneur has to love what they do. Nothing other than passion is going to help you when the hours get long and the money gets tight. For this reason, it is critically important that you decide what your ultimate goals are for business ownership before you start shopping around.

You should ask yourself what you want your life as a business owner to look like. Are you willing to work crazy hours for a big financial return, or are you leaning more towards something a bit more managerial but not completely life-encompassing? Do you thrive on being in control, or do you like to delegate?

The answers to these questions will be important for determining what kind of business and even what individual business would be best for you.

Once you have the answers to your soul-searching in hand, you may be wondering where on a tax return or P&L you can figure out if a business fits with your entrepreneurial desires. The answer is, you probably won’t be able to discern something like the level of owner involvement from just the numbers.

Perhaps, then, you should just ask sellers how many hours they work a week, or how many employees they have? These answers will help, but the three questions that will truly get at the life you will have as owner of the business are these:

When was the last time the seller went on vacation?

How long was the vacation?

Who was in charge and were there any issues while they were away?

These questions might not seem profound, but the answers can tell you as a buyer a whole lot about what the seller’s day-to-day life is like.

If the answer is “never” to the last time the seller took a vacation, then as owner of this business – it will clearly live and die with you. This type of business would be good for someone very driven and passionate who is looking for a good financial return.

If the sellers do take vacation, but they only go for a day or two at a time, then this is likely a business that needs a fair degree of owner oversight and may even be a business that can’t function without you at the helm. This is great for those of you who love control, but probably not a good choice for those who want to be fairly hands-off.

If the sellers regularly go on vacation for a week or two without complaints about major issues while they are gone, then this business likely has a trustworthy and capable management structure that allows the owners this type of freedom. The downside to a great management staff? You get what you pay for, so in many cases this type of business sends the ownership home with less, but the trade off for time off may interest you.

When trying to decide on the right business, first decide what you want your life to look like, then ask the three vacation questions. They will tell you volumes about your life as the future owner of the business.

Are you a buyer who wants to know more about how to decide what business would be right for you? Have you ever asked the vacation questions? Please leave us a comment or question here, we would love to hear from you.

Michael Monnot

What’s Makes A Great Business Broker? Hiring The Right Help

Published September 12, 2022

If you are buying or selling a business, you will want a great broker by your side, as it will be instrumental in giving you the best chance for success.

How do you know if a broker is good? What should a great broker do? Here are a few of the things we do for our clients that mediocre or bad brokers just don’t do:

A great broker should answer the phone and return emails.

We know, this sounds crazy, but we get lots of clients simply because we were the first business brokers who actually answered the phone, returned their call or answered an email.

A great broker should talk to their clients.

Again, this might sound ludicrous, but we come across folks all the time (especially buyers) who have never had an actual conversation with their broker. Their communication has been limited to a few emails and non-disclosure agreements sent back and forth. We think it is critically important to talk to our clients. If we can talk to you and find out what you really have in mind, then we can save you time and target a search of businesses that fit with your goals. If you are selling, your broker should make themselves available to answer any questions that you have and should also know what your goals are. The only way a broker can really know this very pertinent information is to have a conversation with their clients.

A great broker should not be pushy.

Everyone has had the pushy-salesman experience, and it is never positive. Your broker is there to help you buy or sell your business, but all of the decisions in that process are yours alone. Your broker should never try to force you to make decisions that you are uncomfortable with. Many brokers behave like the quintessential bad used car salesman. They don’t get paid if the deal doesn’t close, so they force the deal at the expense of their clients. We think that’s just bad business. We get many of our new clients from referrals from past clients, and that wouldn’t happen if we didn’t keep our client’s best interest at the forefront of every transaction.

A great broker should follow through.

If a client needs information, needs documentation, wants to schedule a meeting or call – then a broker should follow through and make sure that those things are happening in a timely fashion. Business deals don’t close themselves, so a great broker needs to stay on top of what needs to be done, and needs to keep the deal moving.

If you are considering buying a business or if you are ready to sell the business you currently own, look for these qualities in the broker you work with. The difference between a great broker and a bad broker can mean success or failure for your transaction.

Would you like to know more about what we do for our clients that sets us apart from other brokers in the industry? Ask us! Please leave us a comment or question here, and we would be happy to assist you in any way we can.

Michael Monnot

Yearly, Not Monthly: Understanding The Fluctuations Of A Seasonal Business

Published September 5, 2022

Southwest Florida (and all of Florida for that matter) is a very seasonal place. Starting in October our population swells with retirees and vacationers from northern climates where the weather has just turned cold. This is great news for our local economy as businesses are packed, wait times at restaurants climb exponentially – so profits rise. It stays this way until the spring when the weather improves for the northern latitudes. Then local businesses feel the pinch of the approach of the off-season summer. The tourists and retirees are gone, so the year-round locals are all that’s left.

This seasonal rise and fall in business happens in many places, so if you are trying to buy or sell a business, you will need to understand what this seasonality means in terms of a business deal.

Buyers

You will have to realize that the numbers during a peak month are not the numbers for every month, and likewise the months on the low end of the profit spectrum shouldn’t necessarily scare you away. Buyers who are coming to a seasonal area from an area without such fluctuation need to look at the numbers on a yearly basis instead of on a month-to-month basis. If every year the business is slow in July and August, but then rebounds and does well for the remainder of the year, then the business is probably in good shape.

Sellers

Most sellers want to sell their business in the slow months, just after the busy season has ended – thereby taking the lion’s share of the yearly profits when they go. Although this is a smart move financially, most buyers won’t agree to take the wheel with a handful of bad months directly in their path. As a seller, you will need to be realistic about a closing date and be willing to negotiate with a buyer so that both parties end up happy. This is especially true if you will be offering seller financing, as you won’t get paid if the business folds in the first few months after the ownership transition. You will likely need to give up a few lucrative months so the new owner will have enough cash flow to keep the doors open.

The message here is you will need to consider the cycles of businesses in a seasonal area before misinterpreting numbers or trying to set closing dates that will benefit you alone. By allowing some room for negotiation both sides can end up with a fair deal.

Do you have a seasonal business that seems to scare away buyers when they look at the slow months? Are you looking at businesses in a seasonal area and want to know what is acceptable in terms of fluctuation? Please feel free to leave us a comment or question, and we would be happy to help.

Michael Monnot

Why Are Sellers So Difficult? Understanding The Other Side

Posted in Buyers Articles

Published August 29, 2022

If you have just entered the business market, you may have noticed that sellers are not falling all over themselves to court you and sell you on buying their business. Considering how much money you are about to spend, you may feel like sellers should be doing more to entice you – but business sales don’t work that way.

It’s not like buying a really expensive car or a really nice watch where sales people fight over you and do everything they can to close a deal.

When you own and run a business, it is a life-encompassing affair. Your business is your baby, so selling that business – which involves handing over the keys and walking away – can be a very emotionally difficult thing to do.

Whether it’s productive or not, many sellers look at buyers as the villain in the story. They see questions as a personal attack. They get offended when you find issues. They get easily insulted during negotiations. You get the idea.

Another issue arises because most business information is inherently private and proprietary, so it can be hard for a seller to hand over that information to someone who is essentially a complete stranger.

When sellers first list their business, they put together a package of general information, and that information is probably all they are comfortable handing over. Trouble can start when you as a buyer want more information than a purposefully vague listing or a basic marketing package.

As a buyer, you are entitled to all the information you need to make an educated decision, just try to see your requests from the seller’s point of view. Would you be willing to answer a 90 question list after you had provided the answers to those questions in a marketing package the buyer clearly hasn’t read? Would you love the idea of complete strangers digging around your financial records?

The key to working together with sellers is to have a bit of patience and to use your intermediaries (your brokers and attorneys) as a buffer between the two sides. A good broker, for example, will ask you to read any information already supplied and pare down that 90 question list so as not to offend the seller.

Working together with the seller is of the utmost importance if you want your deal to reach a closing table – and keeping things amicable will make the training and transition period (where both sides will be working together) from being an awkward disaster.

Are you a new buyer in the market and have had trouble finding cooperative sellers? Do you have questions about what information you will be able to access and what kinds of questions are appropriate to ask a seller? Ask us! Please feel free to leave a comment or question, and we would be happy to help you on your road to business ownership.

Michael Monnot

BIG Changes Are A BIG Mistake: Why Smaller Is Better For Your New Business

Posted in Buyers Articles

Published August 22, 2022

We see this one all the time. A buyer walks into a functioning (and profitable) business and decides that they want to make changes – big changes.

They bought this business because it had some potential for growth coupled with a fairly successful track record. They gut the infrastructure, they completely remodel, they toss out all of the old operating procedures, they expand. In less than a year they are completely belly-up and have to shut the doors.

What happened? They went TOO BIG TOO FAST.

What do we mean by that?

We mean that as a new business owner, you need to be very careful about decisions that will drastically change the functioning business you bought. The reason the business functions is the current methods work – so instead of fixing what isn’t broken you will need to take some time and figure out what you should change before you change anything.

Here’s an example. If you bought a restaurant that serves pizza but hasn’t been turning the best profit, you shouldn’t change the menu to burgers and redo the décor to try and increase profits. You should spend some time figuring out why the profits aren’t where they should be. In this example, the reason the numbers are down is because the grumpy long-term staff have been driving customers away. Your new menu and fresh décor will only make the problem worse by driving away the faithful regulars who were willing to put up with a grouchy waitstaff for amazing pizza. All this business needed was a new set of employees, not a costly remodel.

Here’s another example. If you bought a small but profitable manufacturing business with the goal of expansion, you probably shouldn’t spend a small fortune expanding the manufacturing facility as soon as you get the keys. In this example, the reason the company is profitable is because they have stayed small. They are able to fill the niche they are in without the major overhead that a much larger facility would require. By spending a few months understanding why the previous owners never chose to expand you can save yourself the horrific and expensive failure of a facility too large to be profitable.

The lesson here? Don’t try to go big without understanding why going big hasn’t happened before. Learn from the mistakes (and the successes) of the previous owner before you try to implement any big changes of your own.

Are you considering buying a business and you have questions about what you should and shouldn’t change? Have you bought a business in the past and made too many changes too soon? Please feel free to ask questions or share your experiences here!

Michael Monnot

What Do We Do About The Employees? Suggestions For Business Buyers & Sellers

Published August 18, 2022

A business is for sale, and this business has employees. The employees have been kept in the dark about the for-sale status in order to protect the integrity of the business throughout the transaction process, but now that a buyer and seller have come to an initial agreement and the sale is moving forward – how do you handle the employees?

This is one of the most important (and by nature carefully handled) aspects of the sale of a business. The sale of any business that has employees (especially a business with critical “key employees”) will need to be handled delicately.

As a buyer, do you demand that you meet with employees before closing as you feel they are critical to the business? As a seller, do you let this happen? What if the buyer walks away or approaches the employees the wrong way?

Although a seller might feel that their employees will only be loyal to their ownership and won’t accept a new boss, in most cases employees can view a new owner as a positive – if the transition is handled properly.

How? Focus your discussions with employees on the benefits a new owner will bring – and wait to tell them until after the sale.

Here’s a few thoughts:

Long term businesses often become stale as sales efforts and marketing may have lagged or become non-existent leaving the business just gliding. A new owner can bring that new energy, marketing ideas, additional employees, new clients and just a new way of doing things which can invigorate a business and push it to the next level. As the business grows and changes for the better those employees who stay can reap the benefits of those changes. This is especially true if the business is being acquired by a larger firm or if the business is ripe for expansion.

One of the reasons why you don’t tell employees too early is most of the time the employees really do want or need to keep their job. Telling employees too soon can make them feel very insecure and can leave them wondering if they will have a job after the sale closes. They might worry that they will be replaced, they might have concerns about getting along with a new owner or they may worry that they won’t be able to handle the changes a new owner will make. These worries can cause an employee to panic and quit – which is bad news for both sides of the deal. This is why both sides should wait until after the sale to tell the employees. Knowing that they’ve made it past the end of the transaction will assure an employee that their job is safe. Buyers should let their new staff know that no major changes are planned and immediately set expectations.

The message here is typically the loyalty of employees is to the business or their job and not necessarily to the seller. It’s also critically important to wait until after the sale to tell employees anything.

Instead (after the sale), both sides should focus on open and honest communication, ask for input about what the business can do better, be clear on new roles and reinforce that the new owner is counting on the existing staff. Hopefully that will build confidence and loyalty on both sides, thereby creating a positive environment as the business moves forward to the future.

Have you sold a business and told your employees too early about the sale? Are you buying a business and want to know more about why it’s a bad idea to talk to the key employees before closing? Please feel free to share your story or ask questions here.

Michael Monnot