A Lesson From Shark Tank: You’d Better Know Your Numbers

If you’ve seen the show Shark Tank, then you know the typical drill. An entrepreneur knows their concept inside and out, but can’t get an investment from the Sharks because they can’t answer basic financial questions. Guess what? This happens in the small business market too.

 

If you take a step out of your business seller’s mindset and take a look at what buyers see in the market, you might be shocked.

 

Most listings for businesses for sale contain sketchy financial information at best, and if they contain any semblance of numbers at all they typically don’t make sense and don’t jive with the price the sellers are asking.

 

 

Where do these discrepancies come from?



While in a few cases the discrepancies come from good old fashioned dishonesty, for the most part the lack of consensus in numbers occurs because the seller simply doesn’t know. Small business owners are great at what they do, but in some cases they are not great at accounting or organizing their financial information.



We come across business owners more often than we should who can’t answer questions like “which product or service is the most profitable?” or “what is the cost to acquire a new client?”. If you are considering selling at any time in the near future, then you need to make the effort to get a handle on your financials long before you are being asked to justify a price.



What things should I be looking at?



Profitability of Products or Services



Many business owners who haven’t broken down the numbers may just assume that the most expensive item or service that they offer is the most profitable – but this is probably not the case. By tracking your products and services individually and then comparing them to the breakdown of what it costs you to provide that product or service, you may discover that your bread and butter comes from a low price item or service that you sell more than anything else. If not just for selling your business, this breakdown will also be immensely helpful when deciding where to put your marketing efforts.



Expenses



Small business owners are famous for paying for expenses out of pocket and never writing it down, or for jamming receipts for expenses in a box under the desk and never looking at them again. When selling your business, you may even think that disguising some of your expenses will make the business look more appealing and more profitable to buyers. This isn’t the case. First of all, there are a few expenses that will get added back before you set a listing price. Second, a business with very low expenses will look suspect to a discerning buyer. Really nailing down your expenses will not only help with selling your business, it will likely allow you to see where your money is going and give you an opportunity to streamline those expenses.





Don’t be a Shark Tank cautionary tale. If you are looking to sell, you need to get your financial ducks in a row, if not for buyers but for your own use to strengthen your numbers, focus your marketing efforts and streamline your expenses. Having a good handle on where your business is and where it needs to be will be instrumental in the negotiation process of your business sale. Strong and organized documentation of all of your financial information will also be very helpful in attracting buyers who are accustomed to the sketchy financials that are typical in the business scene.

 

Are you thinking about selling but are guilty of shoving receipts in a box? Do you have absolutely no clue what it costs you to aquire a new client and want help getting your ducks in a row before listing your business? Please feel free to leave questions or comments here!

 

 

 

Michael Monnot

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

 

 

 

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Don’t Get Hung Up On The Comps – Why Your Business And It’s Listing Price Are Unique

It can be really tough to figure out what a business is worth.

 

Some sellers expect to get back every nickel they ever put into the business. Some want to base their listing price on industry multiples. Some business brokers will even tell you they have a “proprietary metric” that will tell you the best listing price. There are a litany of ways you can arrive at a number, but one of the most common is by using comps.

 

 

What is a comp? If you’ve ever bought or sold real estate then you’ve probably heard the term. It’s short for comparable, meaning you create a price based on what something similar recently sold for. Seems simple, right?

 

In the housing market, pricing based on comps makes a lot of sense. Houses that are similar and in similar neighborhoods are going to be worth roughly the same amount.

 

The same can not be said for businesses, however. Comps can be very useful when trying to determine a ball-park figure, but they break down once you get down to the details simply because businesses are inherently very complex.

 

Here’s an example to illustrate what we mean:

The seller of a large cafe wants to list his place for the same price a similar-sized high-end seafood restaurant down the street sold for. The problem comes when you look deeper. The cafe seller is making roughly what the seafood restaurant was, but he’s got a big chunk of unpaid tax debt to deal with, all of his kitchen equipment needs to be replaced and he’s the head chef so any buyer will have to factor in the salary of a replacement chef. Basing a listing price on the comps for square footage and gross sales wouldn’t work in this situation because the businesses are very different beyond those two very narrow metrics. 

 

Does this mean you should ignore comps when determining your listing price? No, absolutely not. They are a very useful tool when used realistically and in conjunction with the metrics that make the most sense for your business.

 

If you are curious about what businesses comparable to yours have recently sold for, talk to a business broker. They can tell you what the market looks like for businesses in your industry and can help you look at your business as a whole to determine the best listing price.

 

Are you considering selling your business and want more information about businesses like yours that have recently sold? Would you like to know more about the listing process? Ask us! Leave any questions or comments 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

www.InfinityBusinessBrokers.com

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Business Sellers: Why You Can’t Sell Potential

Potential. It’s a powerful word.

 

It’s a word that gets thrown around in the arena of business sales – but what does it really mean?

 

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 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

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Don’t Lock The Door – The Value Of Your Business

We see this way more often than we should.

 

A business owner, for any one of a myriad of reasons, decides that the time has come to step away from their role as the owner of their business. Perhaps they’ve decided it’s time to retire, maybe they were hoping to pass the business on to children who have decided to follow another path or perhaps they are in the midst of a personal/family emergency that will require too much of their time and energy to keep the business afloat. The solution they come up with when it comes to their business? Sell some physical assets, lock the doors and walk away.

 

 

This is a massive and very costly mistake, and here’s why – existing businesses are worth far more than just the value of the tangible assets because an existing business has cash flow. Cash flow has it’s own value and is a highly sought-after commodity, especially if your business is in a healthy market and has the potential for growth.

 

Ok, so cash flow has value – but who would want to buy my business?

 

Lots of people would. Budding entrepreneurs who want a safer bet than starting from scratch, veteran business owners who want a change of pace and are looking for businesses with room to grow, foreign investors who are looking to move to the United States by buying a business – just to name a few.

 

Think of it this way – someone who wants to own their own business has two options. They can make a very risky and very large monetary investment in an unproven location, with an unproven business model and unproven products and services – or they can buy a business who has already overcome those initial hurdles. A buyer knows your location, business model, products and services work because your doors are open and your books show growth. They get an operating business from day one instead of a risk-filled empty space, and you get a financial return on all you have invested in your business.

 

If you don’t really have a plan for your exit as the owner of your business, it might be a good idea to talk to a business broker about what options you may have, what kind of timetable you are considering and what businesses like yours have recently sold for. Asking questions now will give you the information you need to make the smart choice – the choice to sell your business when the time is right. Don’t walk away and leave so much on the table, contact us today.

 

 

 

Michael Monnot

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

http://www.infinitybusinessbrokers.com

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Big Price? Big Mistake – Selling Your Business

 

It can be really difficult to see a business that you have built from the ground up objectively, but there is a crucial decision that you will need to make as a business owner that will need to made without any emotion – pricing your business.

 

New businesses come on the market every day that are priced ridiculously high. They might be great businesses, but most of the time a business that has an over-inflated price will get no traction on the market and will stay listed forever.

 

When a business first hits the market it can create a lot of action from buyers, but those buyers can be permanently driven away if the price is completely insane.

 

So why do people list their businesses too high?

 

Usually one of two things has happened:

 

They got some bad advice. There are great professionals like business brokers and business transaction accountants that can help a business owner price their business correctly right out of the gate. There are, on the other hand, lots of people who know little to nothing about the buying and selling of businesses who give terrible pricing advice. Your brother-in-law who sold his bar in 1986, the CPA who does your taxes, your attorney neighbor who practices labor law – while well intentioned, none of these people know anything about the business market or about what a business like yours could actually sell for. Seek the advice of a qualified business broker who will know how to price your business the right way – to sell.

 

They wouldn’t listen. Even though you have put all of your blood, sweat and tears into your business, a buyer is only interested in numbers you can prove. Your business broker will help you use comparable businesses that have already sold, the numbers you have on the books and other pricing qualifiers to help you set your asking price realistically. Pricing only becomes an issue if you as the seller refuse to listen to the advice. A good broker will not let you demand any price you want, they will refuse the listing if you decide that it is your unrealistically high price or “the highway”. Be very wary of a broker who will let you list your business for whatever you demand – you will end up staying on the market indefinitely.

 

The message here? Seek proper advice and then listen to that advice. Successful business sellers go into the selling process with realistic expectations and with the right help.

 

Are you a business seller who made the mistake of pricing your business too high? Have you asked for advice on setting the price but got an answer you didn’t agree with? Please feel free to leave us a question or comment here, and we will be happy to help you with finding the right price for your business.

 

 

 

Michael Monnot

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

http://www.InfinityBusinessBrokers.com

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How Does A Business Seller Get Top Dollar? It’s All In The Books

Unless you own an accounting firm, it’s likely that the record keeping and accounting parts of your business aren’t necessarily your daily top priority. You have a business to operate, employees to manage, inventory to sell.

 

 

However, if you are thinking about selling your business in the future – those record keeping and accounting skills will be paramount in getting you the biggest bang for your business investment.

 

How? Think about this point from a buyer’s perspective.

 

You are looking at two nearly identical businesses. They are in the same industry, in similar markets and locations and they generate the same amount of cash flow. The first business has immaculate records that stretch all the way back to the day they opened the doors – tax returns, P&L statements, inventory records, payroll records, the list goes on. When you as a buyer request records for this first business, they are already complete and organized and are handed over almost immediately.

 

For the second business, a request during due diligence for records gets you a poorly copied set of two years of tax returns and a box of receipts.

 

Remembering that these businesses are essentially the same in terms of cash flow, which one are you going to be willing to buy and which one will you pay more money for? The first business, right?

 

Why? You know what you’re getting. The history of the business, the current numbers, the contracts and leases – everything is right there for you to look at. There’s no guessing or lack of transparency. It’s all there on paper in black and white.

 

If this scenario has you instantly picturing the dusty box of receipts shoved under your desk – all is not lost. Getting your books in order may be challenging, but the return on investment of time will likely be substantial. You want buyers to be looking at how well your business is doing, not wondering how someone so disorganized keeps the doors open.

 

If you need help, help is available. Your business broker can guide you and refer you to a CPA who specializes in making records useful during a business transaction. All you need to do is ask and be upfront about the condition your records are actually in.

 

Are you panicking about the box of disaster under your desk? Would you like to know what types of records business buyers are going to want to see? Please feel free to leave any questions or comments 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

 

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Make More Money When You Sell Your Business: 2 Surprising Ways To Improve Your Bottom Line

Anyone who owns a business wants to make more money than they already do, but adding to your bottom line becomes crucial when you are considering putting your business on the market – now or in the future.

 

 

A growing business will always be more appealing to a buyer than a business that isn’t, and surprisingly simple changes can help boost your numbers in this critical time.

 

It might seem obvious that one of the easiest ways you can boost your numbers is by cutting costs, but some costs happen so routinely that they may not even occur to you as an owner. For instance, what do you pay for your merchant services? These subscription-type services are something your business needs, but if you take a closer look you might find you are paying far too much. Services like these often contain hidden and unnecessary fees – and if you signed a contract for service you could be hit with a hefty cancellation fee if you find something better and want to switch. Do a bit of research to see if all of your recurring expenses are giving you the most for your money.

 

A second surprising way you can improve your bottom line is by keeping your inventory in check. How much inventory do you have on hand? What inventory control mechanisms do you have in place? Many small businesses don’t think they need inventory management, they just order new inventory when something runs low. Neglecting your inventory can have disastrous effects on your bottom line, however, because excess inventory eats up your cash. Excess inventory, especially inventory that probably won’t sell, can even decrease the amount of money you are able to get for your business. Keeping proper tabs on what you’re buying will keep you from ending up in a situation where you are sitting on a pile of inventory that won’t ever sell – and business buyers won’t want.

 

Cutting costs by minimizing unnecessary expenses and streamlining your inventory process can all add value to your business in the critical time before you sell. 

 

Have you thought about selling in the near future and have questions about the process? Would you like to know more about boosting your bottom line in the run up to a business sale? Please 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

http://www.infinitybusinessbrokers.com

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Business Sellers – You Don’t Have The Best Business Ever

 

 

We all do it. We all think our kids are the smartest or the cutest. We all think we’re the best drivers on the road. An arrogantly positive view of yourself and your life are just part of human nature.

 

This arrogance becomes a big problem, however, when the time comes to sell your business. Why? Whether you realize it or not – you don’t have the best business ever.  If you really want to sell your business, you will have to consider this reality.

 

Your business is a huge part of your life. It’s what you do everyday. It’s where you put all of your blood, sweat and tears. You’ve built it and grown it to where it is today, and you likely remember every step and the purchase of every stick of furniture.

 

Selling your business means you have to take that deep emotional attachment to your business and put it aside so you can make some very rational decisions. Decisions like how much to list the business for. Like whether or not to accept a decent, but not ideal, offer from a buyer. These decisions can be really tough when your heart is still firmly attached to your business baby.

 

Step one of dealing with this part of selling your business is to realize that it’s coming and that your business is only perfect because it’s yours. Mentally preparing yourself will be crucial to maintaining your rationality during the entire selling process. Here are a few things you should consider:

 

  • Buyers are going to offer less for the business than you think it’s worth and they are going to find things about your business they consider problems.
  • You aren’t going to get back every penny you’ve ever invested.
  • You are going to have to hand the keys to someone else and walk away.
  • You are going to have to relinquish all control.
  • The next person might change everything.
  • The next person might fire all of your staff.
  • The business will no longer be yours.

 

If merely reading those last few sentences was excruciating for you as a future business seller, it is really important to keep a few things in mind:

 

  • Negotiations are part of the deal. Low offers are starting points for a conversation, not a personal slap in the face. Buyers will use any issues with the business as leverage during a negotiation, but you would too, if you were in their shoes.
  • You are going to have to be realistic about your listing price. Your reward for maintaining a realistic outlook on price? Your business will be better poised to sell in a competitive market.
  • Handing the keys to a new owner is not a one-sided transaction. They get the keys and you get a very big check that you can use to start a whole new and exciting chapter of your life.  
  • Relinquishing control is a good thing because it means you relinquish all of the stress too. The business might no longer belong to you, but the stuff that currently keeps you up at night is now someone else’s problem.
  • The next person might change everything and fire all of your staff, but more than likely then won’t. They bought a functioning business, it would be foolish to fix what isn’t broken.

 

The point here is it is very important to take a step back from your emotional attachment and rose colored glasses if you want to be a successful business seller. Your business isn’t perfect and isn’t worth 10 times what you should be asking. Negotiations are going to happen. Mentally preparing yourself ahead of time will help immensely for the road ahead.

 

Are you someone who has considered selling your business, but think you might have problems with letting go? Would you like to know what businesses like yours are currently selling for? Ask us! Please feel free to leave questions or comments 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

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Why Would I Use A Business Broker To Sell My Business?

Why would I use a broker to sell my business?

 

 

There are many reasons to use a business broker and every day I get reluctance on why I am not needed to assist in the sale of the business.

 

While some people are successful at selling their own business many times you do not hear about the problems that were encountered either during or especially after the sale and many times the business was really just an asset sale of a very small business.

 

Most businesses have so much at stake and mistakes can be very costly that we can justify our fees and there have been many times that I have gotten the seller more than what they actually had anticipated.

 

1. Confidentiality

 

The number 1 reason to use a business broker is confidentiality.

 

From personal experience I have seen customers stop paying or frequenting a business or employees quit! If this happens this adversely affects your business. I have seen bartenders take the clients after they have found out the business was for sale, contractors that have not gotten paid when their sub-contractors found out they were selling, vendors that have told other restaurants that a business was selling and every single competitor that finds out will use that to their advantage.

 

All of these circumstances can adversely affect the sale of a business and can greatly diminish the value of your business. I have a proven method to confidentially market your business, qualify potential buyers and making sure that it is not your competitor trying to find out who is for sale.

 

2. Evaluation Don’t leave money on the table

 

How much should I ask for my business? There are so many factors that are dependent on this and rarely are sellers very close on what they should be asking. On smaller businesses too often I see a seller asking too much for their business and of course it does not sell and the seller ends up just closing the doors due to the inability to find a buyer but there are many cases on the other end of the spectrum as well. I have recently sold several businesses for over 150% of what the seller had anticipated on getting. Sometimes this is due to the demand for a certain business, improper record keeping and sometimes a seller just wants out.

 

After a proper evaluation which includes a proper presentation package and even re-creating a sales log or financials can we truly attract the right buyer for the business as showing a P&L or tax returns is just not doing you justice. Sometimes training an employee, a slight restructure or the company is also needed but after an in depth consult we will pinpoint any issues and all of the positives that your business really has.

 

3. Business Continuity

 

The average business that actually sells takes about 9 months. Qualifying 10’s or 100’s of potential buyers is very time consuming and many times a single buyer can take hours out of any single day going over the particulars of a business or industry. When you start to factor in the time and money that you spend trying to find a buyer you may have lost out on sales or neglected other aspects of your business when in fact you should be concentrating on building your business and making sure that business as usual is happening. Many buyers are very astute and can recognize lapses in your business and will make sure to discount your business because of that.

 

Let us handle the marketing and you focus on doing what you do best and that is run your business.

 

4. Marketing

 

I am here to provide maximum exposure at no cost to you. We have dedicated telemarketers, mailing campaigns, we are on dozens of websites, we have a large network of current buyers from other states and many other countries as well as access to over 1,000 other business brokers that I will market your business to so you can be assured that if someone is looking for a business like your we will find them!

 

5. Legal protection

 

I have seen a recent study that shows nearly 25% of all closed business transactions are ending in litigation. This can be from improper contracts, buyers will sue if they feel that they were lied to or if they feel like they did not receive what was expected or any other reason. To protect yours interests in any type of lawsuit is very costly.

 

Our process is to prevent any lawsuits through education and documentation. Although there are no guarantees to prevent a lawsuit I have protected sellers when a claim has come up that has prevented litigation and even mediators siding with my seller.

 

As you can see there are many reasons to use the right business broker.

 

Feel free to comment, post any questions or experiences that you may have had and I look forward to working with you.

 

 

 

Michael Monnot

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

http://www.infinitybusinessbrokers.com

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Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907




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