3 Reasons Why A Business Buyer Needs Their Own Broker

In the world of business transactions, it is the seller’s side that pays the commission of the broker (or brokers) involved – so why would a buyer need their own relationship with a broker since they don’t have a business to list?

 

There are many reasons why it’s a good idea to have a relationship with your own broker, here’s a few:

 

Someone Who Actually Knows You

 

Entering a transaction with only the seller’s broker (who you haven’t spent any time talking to other than signing an NDA on a specific listing) means that the broker probably knows little to nothing about your goals, your situation and what you are hoping to get out of business ownership. If a broker doesn’t know any of these things about you, how can they properly advise you on a business? The short answer is they can’t. You need to have a relationship with a broker before you are sitting at a negotiating table, hopefully long before. A good broker is going to ask you questions, lots of them. They should find out how much capital you have available, what your past work and educational experiences have been, your goals for business ownership, what you hope your work day will look like, what your dream business would be, how long you hope to own any business you purchase, what industries you are qualified to work in, what industries interest you – just to name a few. Buying a business is a huge decision, and having an expert involved who already knows all of these details about you as a buyer will be instrumental in successfully finding you the right business to buy.

 

A Buffer And A Negotiator

 

You are about to write a very big check to a complete stranger so you can buy their business – a business that has been their life and probably their baby for some time. Both sides will have serious emotional and financial attachments (you to your money and the seller to the business) so it can be tough to get through negotiations without one side or both ending up offended (and killing the deal). A business brokers acts as a buffer between the two sides, allowing forward progress while keeping the two sides away from each other. This role as a buffer during negotiations can be pivotal to the success or failure of a transaction.

 

Help For A New Owner

If you’ve never owned a business before (and even if you have) the lease, property managers, laws, red tape, licensing, permitting, etc. can be daunting and overwhelming if you don’t have help. Having your own broker ensures that you both know what needs to be done and have assistance with making it happen.

 

What if you already know the broker involved? Can you make a transaction happen with only one broker?

 

Yes. If your broker has a listing that fits your goals, then it can definitely be appropriate to only have one intermediary. The key to success in this situation is the broker needs to know both you and the seller.

 

If you are on the road to business ownership, don’t try to go it alone. Having an experienced and knowledgeable broker who knows you can make the transaction process go more smoothly and will greatly improve your chances of finding the right business for you.

 

Are you new in the market and are wondering what you should look for in a buyer’s broker? Have you already tried to shop the market on your own and have a story to share with other prospective buyers? Please feel free to leave comments or questions below, 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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Problems Later: What To Do When Due Diligence Wasn’t Enough

 

Buying a business can be a scary, scary thing. You’ve been over the numbers, you’ve sought expert advice and you’ve spent the entire due diligence period going over everything with a fine-toothed comb. Surely if there was some underlying issue or skeleton in the closet you’d have found it by now, right?

 

Well, maybe.

 

Businesses are complex, messy creatures. Taking the step into entrepreneurship by buying a business will require a bit of a leap of faith on your part.

 

Even if you go over everything line-by-line there’s a good chance there’s something you missed or something that couldn’t be foreseen.

 

Wait, what? I don’t want to buy a disaster!

 

If you’ve asked the right questions and spent your due diligence period actually doing your due diligence you probably won’t be walking into a mess. You will, however, be walking into a small business that will have it’s issues and ups and downs – it’s the nature of business ownership. There are going to be things that are completely out of your control, and you need to be mentally prepared for the things you will have to face.

 

Going into the process of buying a business already knowing that there will more than likely be problems somewhere down the line will better equip you when those issues come up. It’s far easier to deal with a problem you were expecting than to be blindsided.

 

This isn’t to say that you should be paralyzed by fear that the business you are buying has some hidden fatal flaw. You just need to remember that business ownership is inherently risky, so mentally prepare yourself for those risks and you will be ready to handle them when they happen.

 

Are you thinking about buying a business but are worried about hidden issues? Would you like to know more about the due diligence process? 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

www.InfinityBusinessBrokers.com

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Face-To-Face? Nope. Why Conference Calls Are Important.

 

Some people just like to have meetings. We get that, and it’s a request we get a lot. In a few cases meeting face-to-face with the business seller so you can watch their mannerisms and facial expressions might help you learn a lot about how that person conducts themselves.

 

However, in today’s small business marketplace it’s much more likely that you will do the majority of your meetings via conference call. 

 

Why?

 

Business transactions require a lot of moving parts. The schedules of the sellers, the buyers, the brokers involved and the attorneys involved all need to be considered when trying to figure out when a meeting could take place. If this meeting is to take place at the business that is for sale, it will also have to be scheduled when employees are not present for confidentiality reasons.

 

If you’ve every tried to get 6 or 7 people together for anything at the same time you can imagine how tough that can be. As such, if you are serious about buying a business you are going to have to concede that the majority of initial meetings are going to have to be held over the phone.

 

Conference calls can be taken in a car in the parking lot while the seller is away from their staff. They can happen while the seller is at home. They can happen over lunch breaks or even behind a closed office door.

 

Asking for physical meetings may seem important – but in business transactions they really don’t matter. When you are buying a business you aren’t buying a physical space. You are buying cash flow, so the aesthetics of said space are far less important than the numbers the business generates. Those numbers can be communicated to you via email or share files online and then discussed via conference call, so there is no need to spread paper out on a table and stare at each other in the face.

 

Heading into the business buying process with the understanding that most of your communication with brokers and sellers will be through conference calls will help you to navigate the process more successfully.

 

Wait, does this mean we never meet face-to-face?

 

Absolutely not. Face-to-face meetings are an important part of the business buying process – they are just far more useful much further along in the transaction process. Any initial questions can be answered over the phone and don’t require the scheduling nightmare that meetings sometimes are.

 

Another note – demanding everyone constantly travel to meetings will probably only aggravate the seller and other professionals involved to the point where they might refuse to work with you in the future. If you do make appointments for meetings, do not cancel unless absolutely necessary. Making everyone bend and adjust their schedule and then casually canceling last minute for something other than a dire emergency only shows your lack of respect for others in the transaction and your lack of commitment to seeing the sale through.

 

The point here is you need to be sensible and realistic when asking for meetings versus conference calls. Listen to the advice of your business broker when they tell you one would be better over the other in your current situation. Most things can be accomplished in a phone call that doesn’t require schedule juggling and travel time for everyone involved.

 

Are you thinking about buying a business and would rather have face-to-face meetings? Would you like to know more about how most things can be accomplished via conference call? Ask us! Leave any questions or comments here.

 

 

 

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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Don’t Drag Your Feet – It’s Costing You Money

Buying a business is a huge decision. You are deciding on a whole new life and are about to write a very big check.

 

We get that.

 

A minor case of cold feet is absolutely to be expected with a decision this big, but the mistake many business buyers make is they allow their cold feet to become a major problem. They let their hesitation overshadow their rational side – and they slow the buying process to a near halt.

 

This will always cost you money.

 

We aren’t saying that you should immediately buy the very first business you look at. You should absolutely take a reasonable amount of time to make decisions about the business you ultimately buy.

 

What we are saying is you shouldn’t procrastinate indefinitely. If you’ve found a good business put in an offer. If you don’t, you risk several scenarios that will mean more money out of your pocket.

 

 

The sellers could decide to raise the price. Many new buyers think that this move is unfair, but a seller is completely within their rights to raise the price of their business if no written offers are currently on the table. If the business is experiencing a period of tremendous growth or if the sellers are seeing a lot of interest in their business and are hoping to cash in on the popularity of their listing – they might decide to get more bang for their buck and jack up the price. If you haven’t put in an offer, your only choice will be to pay the new price or move on.

 

You risk taking over the business out of season. If the business you are considering is in a seasonal market where businesses do well for part of the year and then have to survive the lean off-season (common in areas where tourism is big) dragging your feet could mean you get handed the keys right as the slow season starts. This could force you to eat up your working capital surviving until the busy season starts again instead of using that working capital to grow the business during the period of the year when customers are flocking in your door. Help yourself by using the timing of the sale to your favor. Don’t procrastinate yourself into a rough six months.

 

Another buyer might buy the business out from under you. Time is money, so if you are constantly losing out on good businesses because you are waiting too long and other buyers are pulling the trigger before you do – you will be perpetually stuck in the search phase of buying a business. It takes a fair amount of research time, search time, conversations, meetings, conference calls and the like to narrow down your business choices. Don’t waste all of that time (and therefore money) by prolonging your decision and losing out to a more decisive buyer.

 

You have every right to be nervous about your decision to buy a business, but the most successful small business owners are those who can be rational and decisive when it counts. Do yourself a favor and don’t wait.

 

Are you thinking about buying a business but are nervous about taking the plunge? Would you like to know more about the process to buy a business? Please feel free to 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

www.InfinityBusinessBrokers.com

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Buying A Business? The 1st Step

 

Buying a businessFiguring out what you want is the first step.

 

A dream about owning a bar on the beach might not be realistic if you’re looking to have your evenings free to spend with your kids.

 

What do you want your life to look like? What kind of hours do you want to work? What’s going to get you out of bed every morning? These are the kinds of questions you should be asking.

 

A lot about the buying process is deciding what your goals are and then finding businesses that fit those goals. If you don’t know what your goals are, have a talk with an experienced and qualified business broker about what you want out of business ownership.

 

Some people take the jump into entrepreneurship because they want to be their own boss, have control over their own schedule and work for themselves. While these are some of the benefits of owning your own business, they aren’t really well-defined goals. More well-defined goals might be I want to spend evenings with my family, I don’t want to have a job that requires a lot of manual labor and I want to stay within a defined budget in terms of purchase price.

 

You might be surprised that the industry and business has you had initially wanted won’t fit with your goals at all, and another business you would never have considered would better fit the life that you’re looking to have.

 

It’s important to remember that when you buy a business you are essentially buying yourself a job – so just like with a job search you need to have well-defined characteristics that you’re looking for. For instance, when you look for a job you look for jobs you would be qualified for, hours that would fit with the schedule you’d like to have and a location near where you live. You also might consider the amount of money you need to make to maintain your lifestyle. The same goes for buying a business. These are the type of well-defined goals you should come up with.

 

Another consideration? Your family. Whether you want it to be or not, having a business is a family affair. Owning your own business means the buck stops with you, so sometimes that can mean sacrificing time with your family to keep the business running – or maybe even having to bring your family members in as employees in a pinch. It’s important when you start the business buying process that everyone in your family is on the same page and are also on board with potential sacrifices because you don’t want to have issues down the line. An important note here – if you are expecting your children to work in and eventually take over the business, you need to make sure that they are ready, willing and able to go down this new career path with you.

 

If you are ready to start your business search, sit down with your family, come up with a set of goals and realistic expectations for life as a small business owner. Then talk to a business broker about these goals and they can help steer you towards a business that will fit (and make you and your family happy). 

 

Have you always wanted to own your own business but haven’t yet come up with a list of goals for business ownership? Would you like to know what types of businesses would fit with the life you’d like to have? Please 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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When Should You Meet The Employees? A Guide For Business Buyers

You are very seriously considering what could soon be your new business. An offer has been accepted, you’re well into the due diligence phase – but the seller is incredibly reluctant to let you meet the staff. What gives?

 

For a Main Street business (think a small business, not a multi-million dollar business) there is a very real threat to the survival of that business if the for-sale status is divulged to it’s employees too soon.

 

This threat comes from the pervasive (but almost always untrue) assumption that a business for sale is a business on the brink of failure.

 

When the staff of a small business hears that the business is for sale, the knee-jerk reaction is to quit en masse – usually taking their regular clientele with them.

 

The loss of all (or even some) of the staff can be a death blow for a business that doesn’t employ that many people. As such, a seller isn’t going to want a potential buyer to meet the staff until after a deal is closed. If the meeting takes place before closing, the seller runs the risk of the word getting out to their staff, their clients and their vendors that the business is for sale. The rumors can and will spread like wildfire. If the current buyer decides to walk the seller is now stuck with an enormous mess and a complete breach of the confidentiality that is so critical in business sales.

 

 

In order to protect the business and retain the employees through the sale, a new owner will typically meet the staff right after closing.

 

Wait, what if I buy this business and then all the employees quit?

 

First, this rarely (if ever) happens. People want job stability, so finding out that a business has changed hands but is otherwise fine is not going to elicit the same response as if those employees found out that the business is for sale. Again, hearing that a business is for sale will cause a staff to completely freak out over the fear that the business is weeks away from faltering. Second, any employees that quit solely because the business was sold are probably not the kind of employees you were going to keep as the new owner anyway.

 

What if there’s one or two very vital key employees? Can’t I meet them?

 

Maybe. In the Main Street business market each transaction will follow it’s own path. In some instances it might be completely fine to meet critical staff while in others it won’t be. Each transaction, each buyer and each seller will have to figure out what is going to work in their particular scenario.

 

The point here is as a buyer you will have to come to the table with the understanding that it might not be in the cards for you to meet the staff before closing. Understanding this nuance of small business sales will keep you from getting stuck on this point during the negotiation process and derailing your deal.

 

Are you considering buying a business and want to know more about why confidentiality is so important? Would you like to know how to best introduce yourself to a new staff? Please ask us! Leave any comments or questions 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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Dishonesty, Procrastination And Red Tape – A Cautionary Lesson For Business Buyers

 

Buying a business involves a lot of paperwork and red tape – what can sometimes seem like mountains of the stuff.

 

When mired in this sea of required documentation and applications, there can be times when you are tempted to skip a few steps and just bet on not getting caught.

 

This is a HUGE mistake, for a number of reasons.

 

Reason one? It could be considered fraud.

 

If you are filling out those mountains of applications for financing, fudging the paperwork could ultimately land you in very hot water. Lying about anything, even something small, will almost assuredly come up when the lending institution (be it a bank or the Small Business Administration) goes over everything with a fine tooth comb before they write you a check. It would be very bad for their own business if they were in the habit of overlooking items that would otherwise prevent a loan from happening. Cover yourself from fraud charges or denial of funding down the line and be absolutely honest.

 

Reason two? It could mean your licenses get revoked.

 

If you are buying a business that requires some type of licencing, like most do, your applications for those licenses will seem never-ending. Skipping necessary steps, fudging a bit in your answers, procrastinating and missing deadlines or just not applying for the license at all will likely mean you have to close the business doors when you get caught. Licencing agencies get paid to ensure everyone is following the rules, and they have the right to revoke your licenses and close your business if they catch you trying to bend or break those rules. Do yourself and your investment a favor and don’t skimp on your licencing requirements.

 

Reason three? Fines, fines, fines.

 

Even if you manage to escape fraud charges or license revocations, if you get caught or miss an important deadline you will absolutely be slapped with what can quickly add up to debilitating fines. Again, the bankers and agencies you are dealing with have punishments like fines in place to ensure everyone follows the rules. Don’t spend exorbitant amounts of money unnecessarily. Do the paperwork right the first time.

 

We aren’t trying to scare you, we are trying to give you an honest look at what can happen when you think you can bend or break the rules.

 

The paperwork might seem never-ending, but it’s very manageable if you stay on top of it – and every operating business out there got it done.

 

There is also help available if you feel overwhelmed. Ask your business broker for help, or you can hire someone who specializes in licenses for businesses. The message here is do it right so you won’t get caught.

 

Do you have questions about the licensing requirements for the types of businesses you are interested in? Would you like to know more about the services available to help you? Ask us! Please 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

www.InfinityBusinessBrokers.com

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Stand Out! How Business Buyers Can Break From The Pack

Thinking about buying a business? The best way to go about buying a business of your own is to employ the services of a business broker. If you have already started your business search, you may find that it is difficult to get business brokers to pay attention to you. Why is this?

 

For most business brokers, dealing with buyers is frustrating. Up to 90% of potential buyers who enter the market never buy anything, and a big chunk of that 90% are people who are just kicking tires and have no real desire to ever buy a business.

 

 

If you are among the 10% who really do want to buy, separating yourself from the rest will be critical in getting a deal done.

 

How do you as a buyer get business brokers to take you seriously?

 

Ask questions.

Serious buyers ask great questions, and they ask lots of them. Buying a business is very different from buying a house because you aren’t buying aesthetics and a structure, you are buying cash flow. As such, the physical location and furnishings aren’t really important. Great buyers want to see the books and have conference calls with the owners, they don’t want to go on a walk through.

 

Be ready to answer questions.

Yes, personal financial information is intensely private, but when you are buying a business you are going to have to provide proof of funds and answer lots and lots of questions about your money and your work history – so just be willing and able to answer from the very beginning. Sellers don’t want to reveal proprietary information to potential buyers who haven’t proven they can afford the business and landlords/property managers won’t be willing to negotiate a new lease with buyers who don’t have the appropriate financial means.

 

Be patient.

Your business broker (if they’re a good one) has many clients and many listings to manage, so if they don’t immediately call you back – don’t call 17 times in a row. If you have shown that you are a serious buyer, you are important to your broker and they will work hard to get you the best business for you. Likewise, you also have to understand that business sellers are also small business owners, so you aren’t their top priority – the business is. Your questions will be answered, so be patient.

 

Be flexible.

You might think you really want to buy a bar, when in fact a completely different business would better meet your goals for business ownership. Entering the market with a flexible mindset will be instrumental in getting you the right business. You also need to be flexible with the process of a business transaction – negotiations and appointment requests may not always go your way.

 

If you are ready, willing and able to buy a business – stand out from the rest by asking and answering questions, having patience and being flexible. By showing your broker and sellers that you are serious you will be well on your way to business ownership.

 

Do you have questions about the business transaction process? Are you wondering if the business you think you want to buy is actually the right business for you? 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

www.InfinityBusinessBrokers.com

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Buying A Business? 3 Financing Options

 

If you are looking at buying a business, you may not have the full amount you would need to make an all-cash offer – so financing options might need to be considered.

 

If I need financing, what options are available? 

 

Traditional Loans

 

You may be thinking that you can just head down to your local bank and take out a loan to help you buy a small business, but this option will probably have to be taken off the list. Traditional lending institutions are very gun-shy about financing small businesses.

 

If you are entering the world of small business ownership you already know that starting a small business is a risky venture. You are trying an unproven product or service in an unproven location with unproven operating methods.

 

Buying an existing small business removes the “unproven” part of the equation – good news for business buyers – but a traditional lending institution is only looking at the risk. For most prospective business buyers, a traditional loan from a traditional lending institution probably isn’t on the table.

 

The Small Business Administration (SBA)

 

Some businesses on the market and some buyers who are considering those businesses will qualify for a loan from the U.S. Small Business Administration – just be aware that because this is a government program it comes with it’s fair share of paperwork and red tape.

 

Both the business and the buyer themselves will have to meet the qualifications necessary, but in some instances this can be a great financing option for those looking to buy a small business. If you would like to know more about financing options from the SBA, click here to visit SBA’s website or click here to contact us with questions about this lending option.

 

Seller Financing

 

Most small business transactions involve this third type of financing, where a buyer puts down a down payment (typically 50% or more) and the seller finances the rest.

 

This is a great financing option for several reasons. A seller who is willing to keep some skin in the game speaks volumes about their confidence in the future of the business – and it gives opportunities to future business owners who may not have been able to find more traditional lending options.

 

If you can’t get a traditional loan, and SBA financing isn’t in the cards – talk to your business broker about the possibility of seller financing and about what businesses on the market are currently offering this type of financing. Want to learn more about how seller financing works? Click here to read Seller Financing: The Business Buyer’s Guide.

 

The opportunity to buy a business can come in many forms. The financing option that suits you best and is available for the business you are interested in will vary – just ask your broker about your options.

 

Do you have questions about how to qualify for a loan from SBA? Would you like to know what currently available businesses are offering seller financing? Please feel free to leave comments and questions 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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A Fair Price Or Are They Dreaming? Small Business Listing Prices

 

As a business buyer, the number that will be at the center of your attention throughout the business transaction is the purchase price.

 

How much are you willing to pay for the business, and how does the seller arrive at their asking price?

 

These are important considerations, and as you progress through the due diligence phase, you will be deciding if you think the price is fair. What parts of a business will you need to consider when determining the price you are wiling to pay?

 

Cash Flow and Contracts

In order to determine the cash flow of the business you will need to examine financial statements, sales records, and tax returns for the last few years.

This is a great time to enlist the help of your business broker and possibly an accountant who is familiar with analyzing business transactions. Both will have the experience necessary to determine what the records really show in terms of how the business has been doing. It is impossible to gauge the health of a business by simply looking at the bottom line of tax returns – more analysis will be necessary.

You can also have your business broker determine the operating ratios of the business, as these ratios can be a good indicator to compare against industry standards.

Examine any and all contracts and agreements the business currently has. These include purchase agreements, leases, contractor agreements, and any other legal instruments.

 

Inventory

What is the inventory? The inventory includes any materials and products that are used for resale or for client services.

It is very important that you personally and a trusted and qualified representative (like your business broker) are present for and participate in any inventory examination.

You will need to know the inventory status in order to give it a proper evaluation. You should also request the inventory counts from the end of the previous fiscal year.

You may need to have the inventory appraised if you are unable to properly appraise it yourself. The inventory counts as a hard asset, so you will need to know what dollar value to assign to it.

An important point to keep in mind is the value of the inventory is something that can be negotiated. If the inventory is incompatible with your future target market, or in poor condition – these are points to be brought up during negotiations.

 

Equipment and Furnishings

These parts of the business are important in terms of value because they are considered hard assets, so you will need to know what furnishings, equipment (like kitchen appliances in a restaurant), and vehicles are part of the deal.

For any equipment you will need the name and model number for each piece, the present condition, the value when purchased, the current value, and whether the equipment was leased or bought.

You will also need to consider what kinds of changes and improvements to the building will be needed in order to suit your future business plan.  Find out what the seller invested in terms of maintenance and leasehold improvements so you will know what it will take to keep the facility in good condition.

 

 

The price of a business may change based on the economic climate or on the motivation of the seller, but in all reality the price of a business is what a buyer is willing to pay for it. Take a good look at the inventory and other hard assets, along with the cash flow and records of the business before you head to the negotiation table with a number you consider fair.

 

Do you have more questions about how you as a buyer can determine if a price is fair? Would you like to know more about the importance of cash flow? Ask us! Please feel free to 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

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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