Does Your Broker Care About Qualified And Informed Buyers? They Should

Posted in Business Broker Why & How, Buyers Articles, Sellers Articles

Published February 6, 2023

The process of buying and selling businesses can be a bit frustrating. There are rules and procedures in place that ensure the for-sale status and proprietary information of a business on the market only ends up in the hands of the people it should. Those rules and procedures rely on vetting potential buyers and then having buyers who are qualified sign the appropriate nondisclosure agreements (NDAs).

 

 

Here’s how it typically should look. A buyer calls a business broker and has a conversation about their goals for business ownership, the capital they have ready to invest and their past experience. The broker then uses that information to put together a few listings that look like they might match. If a listing or two catches the buyer’s eye, they sign the NDA for that business in order to find out more (like the location, basic financials, etc.). If they like what they see, they will then coordinate a conference call or face to face meeting with the business seller to ask questions. After a few of these meetings/calls a site visit might be scheduled before or after hours when the staff and customers won’t be around. If a buyer is interested they can submit a purchase offer and negotiations can begin.

 

Notice something? The sale of a business is complicated, requires a lot of steps and a lot of time. If the brokers involved are doing their job the buyers who enter this complex and time consuming process are both aware of what they’re looking for and actually able to buy the business in the end.

 

Here’s what you don’t want. A broker who will send you dozens of NDAs to sign without ever speaking to you, meaning you end up wasting your time looking at businesses that would never meet your goals. A broker who will bring a parade buyers through your business for site visits that could never afford to actually buy your business. A broker who will entertain the whims of a buyer who doesn’t have the practical experience necessary to qualify for a SBA loan or that your commercial landlord would immediately reject.

 

A broker who asks the right questions keeps a deal on track and keeps from wasting everyone’s time. You want a broker who actually talks to buyers. You want to be (if you’re a buyer) and want to work with (if you’re a seller) a buyer who understands the process, knows what businesses will actually fit with their goals and has the money necessary to get a deal to closing. 

 

The message here is you need to ask any broker you work with questions and you need to keep an eye out for red flags. If you’re a buyer a broker should be asking you LOTS of questions before they send you any NDA. If you’re a seller your broker should only be bringing you buyers who are qualified and would be successful future owners of your business. 

 

Are you looking at businesses to buy and haven’t had a broker yet who asked you a single question? Are you considering selling your business and want to know what type of buyer would be a good for your business? Ask us! Leave any questions or comments and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

 

 

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What An Earn-Out Is And Why It’s Probably Not For You

Posted in Buyers Articles, Sellers Articles

Published January 23, 2023

When you’re in the business-for-sale market, it can take some creative deal making to put together an agreement that makes everyone involved happy – and sometimes that creative deal making involves an earn-out.

 

 

What is an earn-out?

 

This type of arrangement is typical when the value of a business to a seller is much higher than the value to a buyer, usually because of expected future earnings. Here’s an example:

 

A small boutique clothing manufacturer has recently secured a major contract with a very large retailer, a contract that will significantly raise the value of the business over the course of the next few years. The seller of the business, who has worked long and hard to secure this deal, wants to be paid for the future value of the business. A buyer, on the other hand, only wants to pay for what the business is currently worth – not including any potential future earnings.

 

One way to bridge this massive valuation gap is the earn-out.

 

How does it work?

 

A buyer pays the seller an initial amount, then (as in our above example) as the boutique manufacturer reaches certain milestones with the new large retail contract, the seller gets paid for those milestones. In an earn-out the valuation gap is bridged by paying for the future earnings as they happen instead of paying for the promise that they might.

 

Is an earn-out for me?

 

Not likely. As you can see from the above example, an earn out requires a very specific set of circumstances. Most business deals involve seller financing or loans from the SBA (Small Business Administration) instead.

 

How do I find out if an earn-out would be appropriate for a business I’m selling or considering buying?

 

Ask your business broker. Any experienced and qualified business broker will be able to advise you on the right type of deal for your business or for any business you are considering.

 

Have more questions about creative deals? Want to know if an earn-out is for you? Ask us! Please feel free to leave us a comment or question and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

 

 

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Is My Business Broker A “Good” One? What You Shouldn’t Pay For

Posted in Business Broker Why & How, Buyers Articles, Sellers Articles

Published December 12, 2022

Like any industry, there are good business brokers and there are those who should find another way to make a living. Determining if the broker you’ve chosen falls into the “good” category might seem tough, but one way you can decide is by looking at the things your broker is willing to do without you having to pay extra for that service.

 

 

Most brokers earn a commission at closing, and the amount is based on a percentage of the sale price. If you are a seller, this percentage will be negotiated at the time of listing and will be a part of the listing agreement.

 

Beware the broker who will forgo the listing agreement or who will drastically cut their commission percentage just to get your listing. A great broker will stand firm of their typical percentage because they know how much work they are putting into selling your business. A desperate broker who can’t get and keep regular business will be willing to do anything to get you to sign on the bottom line. Also beware of a broker who charges extra fees for something as basic as your marketing package or advertising costs. These basic elements necessary to sell your business come out of the commission your broker makes at the time of the sale, not before.

 

For buyers, your broker gets a chunk of the money you pay for the business, so technically you are paying them even though you don’t have an agreement. Beware the broker who forces you to pay up front for their services. This shows a lack of confidence in their ability to find you a business and get you all the way through to closing. A great broker is not going to demand a retainer, nor are they going to charge you extra for help with the things every buyer needs – like basic assistance with licensing. If you are getting billed for basic services, then you probably need a different broker.

 

The key here is to watch for those brokers who put the amount of money they make in front of the reason they do what they do for a living. A great broker likes their job. They like helping the small business community grow, and they live for the chase and the thrill of negotiations. They don’t live to nickel and dime their clients. They get the vast majority of their listings through the referrals by former clients and members of their local small business community. They go to bat for their clients and are willing to help.

 

If the things we’ve named for a great broker don’t sound anything like the broker you are currently working with – it might be time for a change. When you initially interview brokers – ask about their referral rate, what kinds of fees they charge (there shouldn’t be any besides the commission) and what kind of percentage they take for commissions. The answers to these questions will speak volumes about the motivations of your broker and give you a good idea of where they fall on the great vs. not-so-great broker divide.

 

Have you had a not-so-great broker experience? Do you have questions about our referral rates and typical commission percentages? Ask us! Leave a comment or question, and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

 

 

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Why A Business You Can Successfully Run Is More Important Than A Business You “Want”

Posted in Become a Business Owner, Buyers Articles

Published November 28, 2022

If you are new to the world of buying a business, or even if you’re a seasoned entrepreneurial veteran, one of the first decisions you will need to make is what type of business you want to buy.

 

Notice that we used the word “want” here. Many budding entrepreneurs have a dream business in their minds, but that dream business might be in an industry that would mean a slim chance of success.

 

What do we mean by that? We’ll use the classic bar example.

 

 

An accountant always dreamed of owning their own bar – but since this accountant has never worked so much as a day in the restaurant industry, buying that bar would be a gigantic mistake. Anyone who has work history knows that each industry and each business require their own unique set of skills in order to be successful. Making such a big change without the practical knowledge of what’s ahead can only lead to massive issues.

 

Drastically changing industries without understanding what you’re in for can be very problematic. An accountant is probably used to working the typical 9 to 5, Monday through Friday gig – so they might have big problems switching to the long hours and long nights required to operate a bar. There are many nuances in each industry. If you don’t have the experience to understand those nuances (like the long hours example) you are setting yourself up for failure.

 

Another big roadblock for new buyers trying to enter an industry with no experience comes from the c0ommercial landlord. If you have zero restaurant experience, then a commercial landlord/property manager is not going to rent you a space where a working restaurant is bringing them revenue. If the restaurant fails due to your lack of experience, they won’t get any rent. You will have to prove to any landlord that you have the practical knowledge necessary to sustain the business.

 

But I want to buy my own business because I want to get out of a rut and try something new!

 

This motivation for purchasing a business is fine, you just need to focus your search on businesses where you have some chance of success. No one wants to buy a business just to drive it into the ground.

 

But I’ve only ever had just one career!

 

Practical experience doesn’t necessarily have to come from previous jobs. If you are an accountant who has spent the last 20 years taking art classes and volunteering to help with gallery openings in your spare time, then purchasing an art gallery wouldn’t necessarily be a bad idea.

 

The point here is to have a serious talk with your business broker about what industries will/won’t work for your both your practical experience and goals – and then listen to their advice. If they tell you buying a bar is a terrible idea, then it probably is.

 

Your broker wants you to be successful because they hope you will use them again when the time comes to sell, and because a very large part of a good broker’s business comes from referrals from happy clients. You will not be a happy client if your broker doesn’t help you find a business that you can’t maintain.

 

Think about what you are passionate about, what your goals are and also what types of practical experience you would bring to the table. Then find businesses that fit that mold, and you will be well on your way to entrepreneurial success.

Do you have an “I bought a business I knew nothing about.” horror story? Do you have questions about what industries would be right for you? Share your stories and questions here, and we would be happy to help you find the right business.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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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

941.518.7138
Mike@InfinityBusinessBrokers.com

 

 

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When You Can’t Make The Rent – Why Business Owners Need An Exit Strategy

Posted in Sellers Articles

Published October 27, 2022

It happens. You own a small business and something gets in the way. A recession. A pandemic. A family emergency. Whatever the root of your business woes – it sometimes gets to a point where your only choice is to lock the doors and walk away.

 

It doesn’t have to get there. If you plan ahead you can sell your business and get a return on all of the investment you’ve made long before you have to make any fatal moves.

 

 

A big, big caveat here. It takes time to sell a business, even one deeply discounted out of desperation. Most buyers aren’t going to want a train wreck – so if you foresee a struggle approaching it’s better to cash out before the situation becomes unfixable. If you’re feeling nervous about the future of your business talk to an experienced and qualified business broker now. Tell them what’s happening and ask if it’s time to list or if your exit strategy can wait a bit longer.

 

If your heart isn’t in it anymore, if your personal life needs way more of your attention than you can successfully give while still maintaining your business, if the metrics are telling you that you are no longer making enough for the business to sustain itself – it’s time to have that serious conversation. No one wants to admit defeat, but it’s better to admit defeat before there’s nothing left. 

 

Selling your business or walking away doesn’t mean your life as an entrepreneur is over. It just means this path isn’t the right one at the moment. You can take the proceeds from your sale and invest in a different business or you can take some time to deal with whatever issues forced you to leave. There are very few successful business owners who got it 100% right the first time out of the gate, so be realistic with yourself and don’t give up on your goals because this time something got in the way.

 

If you are past the point of no return and are left with just liquidating assets, you probably need to do that before the landlord takes over. Read your lease carefully to see where the line in the sand is – where the landlord has the right to lock you out. Once that happens anything inside that business now belongs to them.

 

The message here is failure happens, but failure doesn’t have to cost you more than it should. You can get back a return and move on to something else.

 

Are you a struggling business owner who isn’t sure if it’s time to pull the plug? Have you owned a business you should have sold and have an experience to share? Leave any questions or comments here, or feel free to contact us if you feel like it’s time for that serious conversation – we’re here to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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Why You Should Keep Politics Out Of Your Business Transaction

Posted in Buyers Articles, Sellers Articles

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

941.518.7138
Mike@InfinityBusinessBrokers.com

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

Posted in Buyers Articles, Sellers Articles

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

941.518.7138
Mike@InfinityBusinessBrokers.com

 

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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

941.518.7138
Mike@InfinityBusinessBrokers.com

 

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Business Buyer: What’s In An Offer?

Posted in Become a Business Owner, Buyers Articles

Published July 18, 2022

If you’ve found a business you really like, and you are ready for the next step, congratulations!

 

The next stage in the business transaction process is the initial offer, sometimes called a “purchase contract” or an “offer to purchase”.

 

 

Once a buyer makes an offer, the seller decides if they are willing to accept the offer. If they are, then the business transaction heads into a period called due diligence. Just like you can’t do an inspection on a house until you’ve had an accepted offer – in business sales an accepted offer will give a business buyer a chance to look over every aspect of the business and decide if they want to go ahead with the sale.

 

What goes into an offer?

 

This document will contain the terms, conditions, non-compete conditions, financing, inventory, transition details like training, warranties and any other aspects of the purchase.

 

Should I write my own offer?

 

In most cases, you will want to have a business broker put together an offer to purchase for you, although there are some standardized versions you may be able to use in the most simple of transactions. Business transactions are inherently complex, so having someone who writes these types of contracts all the time to help you will keep you from having issues (like if you unknowingly leave out what could be a crucial part of the contract) down the road. If you really want to write your own, just make sure you have your broker look it over before it gets handed over to the seller.

 

Is an offer set in stone?

 

Absolutely not! Your initial offer is contingent upon what you discover in due diligence. If what you uncover during this period makes you unwilling to go ahead with the purchase, you will have the opportunity to back out. If what you find during due diligence isn’t enough to kill the deal, but you discover, for instance, that the business is earning 15% less than was initially stated , you will be able to adjust your offer accordingly.

 

The moral of the story? An offer is an important part of the business transaction process, so use the experience of your business broker to guide you through this step.

 

Are you a buyer with your eye on a particular business but you aren’t sure what will need to go into the initial offer? Was your initial offer rejected by the seller and you need to know what to do next? Please leave us a comment or question and we would be happy to help you.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

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Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

9040 Town Center Parkway
Lakewood Ranch, FL 34202



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