How much is my business worth? Archives - Infinity Business Brokers

You Don’t Want Us To Tell You What You Want To Hear: Choosing A Business Broker

Posted in Business Broker Why & How, Sellers Articles

Published September 28, 2023

When it comes to selling your business one of the most critical decisions you’ll make is selecting the right business broker. A trustworthy and experienced broker can be your guiding light through the complex process of selling your business.

One of the first things you’ll discuss with potential brokers is a listing price for your business. A caveat here: not all brokers are created equal – and it’s imperative to choose one who tells you the unvarnished truth about what your business is worth.

It does you no good to go with a broker who only tells you what you want to hear.

Why would a broker tell you what you want to hear instead of listing your business for a realistic price? Your listing benefits them whether your business sells or not.

A business broker who lets you list your business for whatever you want only wants your listing because the listing generates calls from potential buyers. Those potential buyers aren’t going to go for your absurdly priced business, but the broker doesn’t care because they can just offer those buyers a different listing that’s more reasonably priced. This is an important (but ugly) part of the business-for-sale market that’s important for you to understand when you’re deciding on a broker. The broker who pushes back, who is brutally honest and has the rationale to backup their thoughts is far, far better for your success than the guy who tells you yes to anything.

Here’s why:

Many business owners understandably have a strong emotional attachment to their business. You’ve likely put in countless hours and your blood, sweat and tears. Consequently, you may overestimate the value of your business based on sentiment rather than a realistic assessment of market conditions, financials and other objective factors. This is where a blunt business broker becomes invaluable.

A broker who actually has your success as the primary goal will conduct a thorough and objective business valuation based on market trends, financial data and industry benchmarks. They won’t inflate the value to appease your expectations, but rather provide an accurate assessment, even if it’s less than what you had hoped for.

While it’s natural to want a ton of money for your business, a good broker will help you set realistic expectations. Look for someone who backs up their thoughts with real metrics and has your best interest at heart, whether you like what you hear or not.

Would you like to know what businesses like yours are currently selling for? Do you have questions about how we help you put together a realistic listing price for your business? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

Why You Might Be The Reason Your Deal Falls Apart (And How To Keep It From Happening)

Posted in Buyers Articles, Sellers Articles

Published March 13, 2023

A deal falling apart is the worst, particularly when it happens as you approach the closing table. Deals don’t close for a myriad of reasons, but to prevent it from happening in yours it might help to know what the market currently shows in terms of the reasons why deals fail. The IBBA and M&A Source Market Pulse Survey from the last half of 2022 offers some insight into why deals collapse.

The report shows that for Main Street businesses ($2MM or less) the main reason deals don’t close is poor financials – which doesn’t just mean that your business accounting system consists of a box of crumpled receipts under your desk. It also means you may have misrepresented, not fully understood or embellished your numbers. Misrepresenting your numbers, whether intentional or not, is a bad look and can lead a buyer to mistrust you to the point that they no longer want to continue with the deal.

Across both Main Street and Lower Middle Market ($2MM to $50MM) the overall reason deals don’t close is an unrealistic seller value expectation. You may have a magic number in your head, you may have a figure you’d love to get for your business that is based on what you’ve invested over the years, you may have a written valuation from a professional that specializes in your industry – but in the reality of the business-for-sale market all of those numbers essentially mean nothing. Your business is actually worth what a buyer actually pays you for it.

Another major factor in the death of deals is time. The longer you make a buyer wait, the longer your business is listed, the longer the transaction takes to work it’s way through the process the more likely it is to die. People change their minds, the market fluctuates, life circumstances get in the way. The way to combat time as a killer is to be ready. Have your financials in order, prep (with your business broker’s help) the answers to commonly asked buyer questions and be proactive with buyer requests – handling them the moment they come in.

If you’re a business buyer, know going in that some really great businesses have records that are lackluster (in terms of organization) at best. Also understand that it can be incredibly difficult for a seller to put a number on all their years of hard work and investment. Be patient with your negotiations and ready to possibly dig through a box of receipts.

The moral of this story is although some reasons your deal might fall apart are out of your hands – most reasons are absolutely within your control. Go in ready, with realistic expectations and you’ll have a far better chance of seeing that closing table.

Do you have a Main Street business to sell and want to know what businesses like yours have recently sold for? Would you like to know how to get your financials ready for buyer’s eyes? Do you have questions about how to negotiate with a seller who has their business listed for an unrealistic price? Ask us! Please leave any questions or comments and we would be happy to help.

Michael Monnot

Honesty Vs. Telling You What You Want To Hear – Selling Your Business With A Broker

Posted in Sellers Articles

Published November 3, 2022

If you really tried to add up all the hours you’ve put in, every penny you’ve spent, all the stress you’ve endured – it would probably mean your business is worth an absolutely insane amount of money. It would be great, right?

In reality your business is only worth what someone is willing to pay for it, so pricing your business correctly when you list is extremely important. Price it too low and you’re leaving money on the table. Price it too high and buyers probably won’t attempt to make an offer. You need to be in that sweet spot where you’re price reflects the actual cash flow of the business but isn’t delusional.

How do you figure out the sweet spot for your listing price? Talk to an experienced and qualified business broker. They’ll help you consider cash flow, your equipment and inventory, upcoming contracts, debts the business holds, your commercial lease, what comparable businesses have recently sold for, etc. and guide you to a listing price that gives you your best chance for the highest return on your investment.

Here’s the most important point. If you’ve chosen the right broker their goal is to help you sell your business successfully. The only way that’s going to happen is if the listing price is right. If you’ve got a broker who will let you list for whatever you want – that’s a problem.

Letting a client list their business for whatever they want is a way for some brokers to get listings – listings they know won’t sell. Why would they do this? Any listings they have will generate calls from buyers, so when a buyer inquires about your substantially overpriced listing that broker will use the opportunity to steer your potential buyer to another of their listings they can actually sell. Your business languishes on the market indefinitely and you don’t see the benefit of the listing – the broker does.

How do you keep this form happening to you? Hire a broker who tells you the truth. You might not like what you hear, but a broker who actually wants to sell your business isn’t going to let you list for an astronomical price. They’re going to help you hit that sweet spot – even if it’s less than you would ideally want. A good broker bases their listing prices in reality, not with the goal of getting the listing at any cost.

Ask lots of questions in your initial conversations with brokers. If you’re requesting a specific listing price and they don’t agree, ask why. If they are willing to let you choose any number you want – remember in that scenario you aren’t the one who benefits.

Have you tried to sell your business without any luck and now think it was because you listed it for the wrong price? Do you want to know what businesses like yours have recently sold for? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

Should I Use Multiples? Advice For Business Sellers & Buyers

Posted in Buyers Articles, Sellers Articles

Published July 4, 2022

The most important number in the sale of any small business is the price. The listing price is what a seller hopes to get and the purchase price is what someone is actually willing to pay.

Where do these numbers come from?

There are a few ways that business prices come to be. They typically come from an analysis of the financial records of the business, coupled with what the assets and inventory are worth. In some cases, it is appropriate to use the sold price of comparable businesses in the area, in others it comes down to multiples:

What’s a multiple?

In the simplest form a multiple takes the average sale price for businesses in a particular industry and compares that number to what a business earns. For example, the multiple for a restaurant might be two times earnings – meaning you should price a restaurant at twice what it earns in a particular year.

Now that you know what multiples are, how should you use them?

Multiples should really only be used to determine a ball-park figure for the value of a business. Take the restaurant example. Restaurants are very complex businesses, so most restaurants sell for a number very different than an oversimplified two times earnings.

If multiples only give you a ball-park figure, should you use them at all? Yes and no. When you are looking to sell your business, multiples can help you get a starting point for where you might want to set your listing price. It is critically important, however, that you not stick with a simplified number that could cause you to over or under value your business on the market.

If you are a buyer, you can use multiples to help you gauge if the listing price of a business is in line with industry standards – just remember that the justification for a listing price probably includes much, much more than just the multiple.

Are you a business seller who wants help using multiples to set a listing price for your business? Are you a buyer who has questions about how to use multiples when analyzing business prices? Ask us! Please feel free to leave us a comment or question here, and we will be happy to help you with multiples.

Michael Monnot

You Can’t Sell “Might Be”: Prepping Your Business For A Better Return

Posted in Sellers Articles

Published March 24, 2022

Potential. It’s a powerful word. It gets thrown around in the business arena – but what does it really mean when you’re trying to sell your business?

Any business can have potential. Potential for growth. Like a small restaurant only open for lunch with a devoted local following who would love dinner hours as well. Potential for a new customer base. Like a pressure washing business that has never approached any large neighborhood communities with the hope of securing big accounts.

Here’s what potential isn’t. Potential isn’t worth a whole lot. You may love your business, and you may see the potential your business could have if you implemented some changes – but if you haven’t made those changes yet you can’t ask a buyer to pay a premium for something that MIGHT be. A buyer is only going to pay for what ALREADY IS.

Maybe you’ve been dragging your feet where marketing is concerned and haven’t been pushing for any new customers. You know you could land some new accounts, you just haven’t made the time. The only way to reap the benefits of that potential growth is to implement those changes yourself. An increase in customer base and rapidly growing cash flow are absolutely going to have value to a buyer. The potential for that future cash flow if you leave the work to the next owner? No value at all. No one is going to pay you a premium so they can do more work.

The message here is you can sell your business today, as is – or you can take the time to build the future of your business before you sell. Increasing numbers, increasing accounts, ramped-up marketing and new customers will make your business far more valuable in the eyes of a buyer than just the promise of potential down the road. Turn potential into cash by implementing those changes today.

Are you considering selling and are looking for some ideas on how to grow your business to get a better return? Does your business have potential but you don’t know how to turn that into action? Please feel free to leave any questions or comments and we would be happy to help.

Michael Monnot

How Close Is Close Enough? Thoughts For Business Sellers

Posted in Sellers Articles

Published January 21, 2021

When you first list your business one of the major points of discussion will be the delicate balance of where to set your listing price. Set the number too high and good buyers will pass your business by in favor of those more reasonably priced. Price it too low and you won’t be getting the best return on your investment.

You probably have a dream number in your head – an amount you’d love to get. Here’s the thing. That dream number may or may not be realistic – and isn’t something you should stick to come hell or high water. Instead, consider a threshold where you would still be comfortable making a deal – then add a bit to reach your full listing price. Businesses rarely sell for this full listing price, so the buffer between your threshold and the listing price is the sweet spot where negotiation can happen.

Ok, I’ve got a buyer and we’ve been negotiating for weeks. So far their offer is still below my threshold. Do I take the offer or walk away?

You can always walk away, but ask yourself these questions first:

One, is what they are offering unfair – or is it just not ideal? If you haven’t been able to reach a middle ground with your buyer, ask yourself “why aren’t they coming up?” Is there something about your business that will be expensive to fix or overhaul the day they walk in the door? Are they worried about a customer who makes up a large percent of your bottom line leaving once the business changes hands? Are you asking for your inventory or equipment to be valued as new even though it’s a few years old? If you were the buyer – would what they’re offering make sense? If so, maybe you need to come down a bit instead of trying to force them to come up.

Second, is there a way to meet in the middle by making a creative deal? Could you offer seller financing? Is there a way to structure a deal that will hold back money in escrow based on certain markers over a period of time? Every small business deal is different, and it’s this individual nature that allows for creative purchase contracts to come together. If you and your buyer are really deadlocked on price, maybe there’s a creative way to reach a deal anyway.

Finally, are you willing to walk away and start over with a new buyer? Selling a business takes time. A lot of time. It also takes a huge amount of effort. If you’ve been negotiating with a buyer for weeks or months and there’s a gap between what you would want in an ideal world and what they are willing to offer – is it going to be worth it to you to start over? Unless the gap is huge – probably not. It can be difficult to end a negotiation by letting the other side “win”, but how many weeks or months will it take you to find another buyer? Will that new buyer be willing to offer you substantially more, or are they likely to come to a similar conclusion and offer something like your current buyer is? You should also think about your deal in terms of the difference in price. For example – is the difference $5,000 or $10,000 in a deal worth hundreds of thousands of dollars? Does it make sense to kill a deal for a relatively small difference in price? In most cases, the answer will probably be no.

Here’s where we’re going with this. How close is close enough? You might not be getting that ideal number in your head, or the offer might be under a threshold where you would love to be – but does it make sense to walk away for the difference? In a lot of cases you can bridge the gap with your buyer by using a creative deal, or by looking at the offer objectively from a buyer’s point of view.

Are you considering selling your business and have questions about what a fair listing price might be? Would you like to know more about creative deals we’ve put together in the past? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

Why Flexibility Is The Key To Selling Your Business

Posted in Sellers Articles

Published July 9, 2020

Wouldn’t we all love to put our business on the market and get a full-price, all-cash offer on day one?

As you can probably guess, this isn’t how business deals go in the real world. As a seller you need to be prepared for flexibility if you really want to end up at a closing table.

The first thing you need to be flexible with? Price. You may have a number in your head, a dream amount that would make all of the personal investment of time, energy and money into your business worth it in the end.

Unfortunately, a business is only really worth what someone is willing to pay for it – so your dream number is probably a far-fetched fantasy. When you first talk with your business broker, pricing will be a big part of the discussion. In order to have a successful sale, you need to price your business right from day one. Overpriced businesses will get overlooked by good buyers and languish on listing sites indefinitely.

How do you set an appropriate price?

The price you set needs to be based on what the current market will support, what comparable businesses have actually sold for recently and the cash flow the business currently generates. The original retail cost of your ten year old equipment, the amount of money you spent on cosmetic improvements last year, how much it cost you to buy the business 15 years ago – these things aren’t going to contribute to a realistic price. The key here is to listen to your broker about what a sell-able listing price would be.

The second thing you need to be flexible about is financing. The all-cash deal is extraordinarily rare, and the vast majority of small business sales involve at least a bit of seller financing. The good news is in most seller financing deals the buyer is putting up a substantial down payment, so you won’t be financing the entire purchase price. The other good news is there is no set or absolute way that a seller financed deal needs to look (like there would be with a more traditional loan from a major lending institution), so you can negotiate a creative deal that makes everyone happy.

By offering seller financing you will also be opening up your business listing to far more buyers than demanding a full-price all-cash offer would allow. Deals that include seller financing also show buyers that you have enough faith in the future of your business that you would be willing to depend on that future to get paid.

Are you thinking about selling your business and are wondering what an appropriate listing price would be? Do you have questions about what kinds of creative seller financing deals we’ve put together in the past? Ask us! Feel free to leave any comments or questions here.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

Want To Sell Your Business? 3 Must-Haves

Posted in Sellers Articles

Published May 21, 2020

In a perfect world, every business seller would list their business and get an all cash, full price offer the next day.

In reality, this is rarely the case. Like, it never happens that way.

On average, it typically takes nine to twelve months to get a business from listed to sold.

As a seller, there are three very basic (but also very simple) things you can do to improve your chances of selling right out of the gate.

Offer Seller Financing

Banks and other more traditional lending institutions have always been gun-shy about small business loans – and the 2008 recession didn’t help. There are always a lot of buyers who are looking for new business opportunities, but they typically don’t come with a lot of cash on hand. By offering to finance part of your purchase price, you will be able to attract many more buyers than you would otherwise. Worst case scenario if the new owners fail? You get to to keep the sizable down payment the buyers put up and you get the business back.

Hire A Business Broker

You might be great at what you do, but what you do isn’t helping people buy and sell businesses. This is what business brokers do for a living. They know the business transaction process inside and out, they have access to buyers you could never find and they are experts in confidential business marketing. Going it alone won’t save you money. It will more than likely mean you either won’t be able to sell at all or will end up having to take far less for the business than if you had hired the right help.

List For A Realistic Price

Your business is only worth what someone is willing to pay for it. When deciding on a listing price many sellers try to set a price that will recoup all of the money they have invested over the years or use the value of new equipment when determining what their 10 year old stuff is worth. We get that you have invested a great deal of your time, money and energy in your business. You can absolutely get a good return on that investment, but you need to be realistic. Your business price should be based on your cash flow, what your equipment and inventory are actually worth and what the market will currently allow. Making a sensible and well-informed decision about listing price is key if you ever want to see a closing table.

If you think you are ready to sell, go into the process with an open mind. Have realistic expectations, and use the experience of your business broker to help you set realistic goals for your transaction.

Do you have questions about how to price your business? Would you like to know what businesses like yours are currently selling for? Ask us! Leave any questions or comments here and we would be happy to help.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

Opportunity Is Knocking – Grow An Entrepreneur, Not Just A Business

Posted in Sellers Articles

Published April 4, 2019

It can be an excruciatingly tough decision. You’ve created a successful business and are generally happy with where it’s headed. You spend every waking hour working on growth and you are reaping the benefits of all that labor. Selling your business and an exit strategy are probably something you’ve considered down the line – but times are good so you’re definitely not going to sell now. Right?

Here’s the thing. Your business is currently successful. The economy is booming. You have solid numbers for the last few years. Your business is probably worth a lot right now. How much are you willing to bet that this upswing is going to last? If you wait too long to sell, then the answer could be everything.

No one knows how long the economy will boom, but we all know it can’t be forever. If we have another crash like the one in 2008, could your business survive? You and your family might currently be in good health, but that could change and pull your focus away from the business to the point where the business falters.

The calculation of how long to hang on to a business while the going is good can be tough, but here’s a few things in the tea leaves that might make you consider selling sooner rather than later.

The Baby Boomers are retiring in record numbers. A lot of these Boomers are small business owners and as such will be looking to sell in the near future so they can retire. That means a glut of stable, long-term small businesses with good numbers will be hitting the market. All of these great businesses will be your competition, and too many businesses for sale will absolutely push prices down.

The economy is great, and there’s a rush of new construction happening everywhere – in both the residential and commercial sectors. Real estate prices are soaring. Sounds like life in 2006 and 2007, right?

So what’s a business owner to do? You may not want to sell because you are essentially selling yourself out of a job – but here’s another way to look at your business investment. You can only grow your current business so far, and if this article is resonating with you then you’re probably nearing or have already reached the peak. Selling and moving on to new ventures can grow you as an entrepreneur instead of just growing one business. Here’s another thought – if the economy does crash and you were able to sell before it happened, you will be uniquely positioned to invest in a new business venture when no one else has any capital and the prices for businesses are way down.

The tried and true notion of buy low, sell high absolutely rings true in the small business market. If you haven’t considered selling because everything seems great – maybe you should. Selling your business while it’s still worth a lot will give you choices and capital that you won’t have if you hang on through the wave of retiring Boomers and the next economic meltdown. Consider growing yourself as an entrepreneur and get on the path to sell today.

Are you a small business owner who hasn’t considered selling? Would you like to know what businesses like yours are currently getting in the market? Please ask us! Leave any questions or comments 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