Learning To Love The NDA – Thoughts For Business Buyers

If you are a business buyer, you should absolutely love the business transaction process – especially the tenant of confidentiality and the need to sign non-disclosure agreements (NDAs). Why? Let’s first talk about why some business buyers hate NDAs.

 

 

When you enter the market to buy a business, many new buyers assume the process will be very much like the process to buy a house. Nothing could be farther from the truth. Buying a business does NOT involve looking up businesses for sale and then driving around to look at them before you pick one to buy.

 

Why? When you buy a business you are buying an existing, operating business.

 

In order for that business to stay existing and operating the fact it is for sale needs to stay a closely guarded secret. Confidentiality is key.

 

A breach in confidentiality and the disclosure that a business is for sale can mean very bad things. People naturally assume a business that is for sale is a business that is on the brink of failure, although this is rarely true. When a business sale is disclosed the staff can quit en masse, vendors can cancel contracts, clients can go elsewhere – the list goes on.

 

These potentially catastrophic consequences mean anyone who is interested in buying a business must sign the NDA before the name and location of that particular business is disclosed. Some buyers hate this and refuse to sign the NDA or fight with brokers about providing their own information to receive the NDA.

 

The information you provide in order to sign the NDA for a particular business is both simple and straightforward. You must provide your full name, your home address, your phone number and your email. Why do we need this information? Why can’t you use your P.O. box or a business address instead of your home address? The NDA you are signing needs to be tied to one individual – you – so the same address you use on your driver’s licence must be used.

 

If you really feel uncomfortable providing this information, you should consider that your simple identifying information is paltry in comparison to what a business discloses to you once the NDA is signed. Not only will you now know the name and location of the business that is for sale, you will likely gain access to financial information as well.

 

You should also consider that the information you provide to get the NDA is the same information you would provide when signing up for a discount card at a grocery store. It’s really not a huge disclosure of personal information when you think about it.   

 

So why should you love the NDA? The business transaction process, including the NDA, ensures that the business you end up buying hasn’t had a catastrophic disclosure of confidentiality by you or any other prospective buyer before you get handed the keys. It means your new business will transfer to you intact and still operational.

 

Still need convincing that the NDA is a great thing for you as a buyer? Do you have additional questions about the business buying process? 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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Keep It Together – How A Business Buyer Can Help

 

Business transactions are complicated beasts, and as such they fall apart more readily than they stay together.

 

If you are looking at buying a business, you will need to do your part to keep your deal together if you ever hope to make the jump to business ownership.

 

How? By making sure you know what you want and what’s ahead of you.

  

Are you really, really sure that you want to buy a business? Small businesses are very rewarding ventures, but they are intense in terms of the time and effort that you will need to invest. Are you sure you want to make the move from a 9 to 5 job with two weeks of paid vacation to a life where the buck stops with you? Yes, small business owners decide what hours they work – but the hours necessary can be very long. 

 

Do you have realistic expectations? Buying a business is absolutely nothing like buying a house, and it takes a lot of time and patience. It also requires many, many moving parts and a good deal of negotiation. Talk to your business broker about what the process will be like so you know what to expect.

 

Have you done your homework? Do you have the background and experience to own the type of business you are considering? It is far easier to buy a business in an industry where you have some practical experience because you will already know something about how the business is run. If you are trying to enter a completely new industry, you might give yourself an incredibly steep learning curve the moment you take over as owner.

 

Are you being honest about the funds you have available? Some new buyers assume that they will be able to finance most of the price of a business, or they think they will be able to negotiate for a rock bottom price. Neither of these notions are true. You have to be realistic about what the money you have available will get you, and you need to be upfront when asked to prove your financial capacity. Trying to pretend you have more that you do will absolutely blow up in your face and cause your deal to fall apart.

 

Are you prepared to be very, very patient? Like we’ve said before, the process to buy a business requires a lot of patience. There are contracts to put together and negotiate, licenses and permits that need to be obtained, meetings, conference calls – the list can be seemingly endless. There are also a lot of people involved – busy people like the brokers, the seller, attorneys, CPAs. Requests for documentation or finalizing of agreements can take a lot of time, so you need to remain patient with everyone involved if you want the deal done.

 

Do you have questions about the business buying process? Would you like to know what industries would be right for you? Ask us! Leave comments or 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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Buying A Business? Why A Terrible Business Seller Isn’t A Bad Thing

If you’re new to the process of buying a business, you might wonder why business brokers exist. Can’t reasonable buyers and sellers get together and get a transaction all the way to the closing table?

 

The reality of the business game is there is very little chance of success when buyers and sellers go it alone. Why? Buyers and sellers don’t buy and sell businesses for a living.

 

If you are in the market for a business, then the person you most want sitting across from you at the closing table isn’t a seller at all. You want a business owner instead.

 

A business owner is someone who cares about the business they are selling. Their top priority isn’t how fast they can get out the door – it’s their bottom line. A business owner is focused on growth and getting the most money possible for their successful small business.

 

 

A business seller, on the other hand, is a temporary title. It involves gathering and assembling documentation and information about the business, being available to answer questions or requests and negotiation skills.

 

Someone who is a successful small business owner will not necessarily make a great and/or cooperative seller because selling isn’t their focus and it’s something they’ve never done before.

 

This is where the role of a business broker is critical and patience on your part as a buyer is a must. The person on the other side of the table isn’t a professional business seller, they are a professional business owner.

 

If it takes some time to have questions answered or get requested documents you shouldn’t be frustrated, you should be glad that they are focused on the running of the business you are about to buy. A business owner who doesn’t care about the day-to-day operation of their business could potentially be leaving you with a disaster the day you get handed the keys.

 

Your business broker is there to ensure the process goes smoothly, to keep the lines of communication open and apply the right amount of motivation to a seller so that they can both successfully run and sell their business. Have patience with the process – and with the business owner across the table. 

 

Are you considering buying a business but have more questions about how the process works? Would you like to know how long it typically takes to get to a closing table? Ask us! Please leave questions or comments here and we will 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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Tips for Business Buyers: The Negotiation

If you are thinking about buying a business, then you probably already know that one major step on your path will be the negotiation of a purchase price and the negotiation of the purchase contract.

 

 

If you’ve ever been involved with the purchase of a house or a car, then you already know a little bit about how the negotiation phase is going to go. A buyer offers a price, the seller counters – and after a bit of back and forth the deal is done.

 

The major difference with business sales? There will be many, many more moving parts.

 

The best way to deal with these moving parts is to prepare yourself for the negotiation process:

 

Find and use a business broker

 

Buying a business is no small task. There are large amounts of money changing hands, a purchase contract that needs to be drafted and negotiated, licensing and permitting requirements that must be met, a new commercial lease that must be negotiated – the list goes on. A business buyer will be far better off with an experienced adviser by their side – and your broker also acts as an all-important buffer between you and the seller. Asking the wrong kind of question, asking too many questions, coming in too low with an offer – all of these things can offend a seller. By using an intermediary like a broker you can keep the deal moving while simultaneously keeping the other side of the negotiating table happy.

 

Make your offer realistic

 

You absolutely don’t want to overpay for your new business, and you want to keep as much of your cash as possible to ensure you have enough working capital the day you take over as owner – but that doesn’t mean you should insult the seller by offering a rock-bottom price. Unless the business is listed as an asset sale, don’t treat it like one. An operating business is so much more than the depreciated value of the equipment and inventory. You need to remember that to the seller this business is a huge deal. Most sellers are very emotionally attached to their businesses because the business has been an enormous part of their life. Low-balling a seller will almost assuredly offend them – some to the point where they will refuse to work with you. Make your initial offer fair and be able to justify that number when asked.

 

As a side note, if you are a buyer who is making an all-cash offer, you may be in a better spot to negotiate for a lower price than someone who is looking for seller financing to be a part of the deal. If you do need seller financing, consider the situation from the seller’s point of view. You probably wouldn’t give someone a big discount on the purchase price of your business if you were going to be taking a big risk and financing part of the deal.

 

Be 100% prepared for compromise

 

One last and very important point to make regarding negotiations – the final purchase price and purchase contract will be a compromise for both sides. Go into this process understanding the reality that you are not going to get everything that you want, no matter what side of the table you are on. Many deals have died because one side (or both) refused to budge over something tiny, like the value of a piece of equipment or the closing date. Stay calm, patient and willing to compromise if you want to have a chance of reaching the closing table.

 

Are you considering buying a business but have more questions about the negotiating process? Would you like to know what types of businesses are currently out there in your price range? Ask us! Please feel free to leave comments or 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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The Toxic Myth Of The Perfect Business – How To Handle Messy Books

It is a very common complaint in the world of business sales. A buyer comes to the market with money in hand and ready to buy the right business – but every time they request financial documentation what they get is poorly assembled numbers, difficult to understand tax returns and no current financials of any kind.

 

Do they want to sell their business or not?

 

What you have to remember about the small business world is owning your own business is a tough and time-intensive enterprise. Small business owners are great at what they do, but most are not trained accountants. Many times record keeping and financial documentation fall down the priority list, and what a buyer is left with is what the seller was able put together in the short time the business has been listed.

 

 

When we take on a listing for a small business we often get handed nothing more than a big box of crumpled papers and register tapes – and have to figure out the numbers from there. This is not true of all small businesses, as some owners are better record keepers than others – but you have to remember that even a great business may not have the world’s most organized books.

 

It is also typically true that the larger the business is, the more likely it is that they have an accountant on payroll and therefore the more complete the records will be – but if you are in the market for a small business you probably don’t have the couple of million dollars you would need to buy one of these higher-priced and more-complete-records businesses.

 

What should I do then? How can I decide with seemingly incomplete records?

 

Have patience, and understand that you will never get perfectly organized books. What you will get is the opportunity to look at all of the financial records of a business once you have entered the due diligence phase. Your business broker will be there to help you, and if the books really are a mess then perhaps an accountant familiar with business transactions will be brought in.

 

What you can do as a buyer is use that not-so-pretty cursory information you get with your first requests – like P&L statements and tax returns – to weed out businesses that don’t suit you and focus a more thorough look on on the ones that do.

 

Are you in the market to buy a business, but are disappointed with the information you’ve been sent so far? Would you like to know more about how we as brokers turn that jumbled box of paperwork into use-able numbers? Please feel free to leave any questions or comments here, 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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Are Good Businesses For Sale? A Business Buyer Question

 

If you are considering a foray into small business ownership you may have a very common misconception – that any business that would be offered for sale must be a business on the brink of failure. This misconception probably comes from media portrayals of huge multi-million dollar mergers and acquisitions with the purpose of preventing bankruptcy or saving a major brand name. The truth is, however, that perfectly good businesses go on sale every day, from the small main-street shop to businesses that employ thousands of people. 

 

Think about home sales. A home that is listed on the market might be a tear-down, but for the vast majority of home listings the house is in great shape. The same goes for businesses.

 

If good businesses do go up for sale, why? Why would someone sell a great business?

 

Business owners decide to sell for a myriad of reasons. Many of these reasons are similar to reasons one might give for listing a house. Maybe the current owner is looking to get a financial return so they can retire. Maybe they are looking to move to another area. Perhaps they have some sort of family situation that is forcing them to sell – the point is not every business on the market is teetering on disaster.

 

Ok, so how do you tell if a business on the market is in good shape (or not)?

 

Do your homework and ask questions. When you inquire about a particular business you will be given access to cursory financial information. You can use that initial information along with general research (like the business website, reviews, social media accounts, etc.) to determine if you want to move ahead in the business purchase process. If you are very serious about a business then conversations with the current owner, site visits and the like would happen next. After your offer to the seller has been negotiated and accepted you will enter the due diligence phase, where you will be able to pour over everything and decide if the business is still right for you.

 

You will have ample time and opportunity to discover any issues the business has, and then you will have the choice to proceed or stop based on what you find. Even if a business isn’t in amazing shape, it could be a good buy because you could pay less up front and then work to turn the business around. This is typically the path a serial entrepreneur takes, buying a business in trouble and then growing it with the intention to sell once the business has met certain markers for success.

 

The point is that there are lots of good businesses out there, and your path to business ownership will give you all the information you need to make an informed choice about what you are buying.

 

Are you thinking about buying a business but have more questions about the process? Would you like to know what kinds of business ownership opportunities are currently available? You can click here to search, or leave us 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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Am I Buying The Building? Commercial Leases And Business Buyers

If you are new to the world of buying a business, then you likely have some basic questions that need to be answered before you really get rolling. One very common question we get from the curious future entrepreneur when discussing businesses to buy is:

 

Do I have to buy the building too?

 

 

The answer to this question is almost always no, as commercial leases are the norm in the small business world.

 

What do I need to know about commercial leases when I’m looking to buy a business?

 

First and foremost, you can’t simply look at the amount of rent the current owner pays and the length of time left on the current owner’s lease to understand the nuances of the commercial lease market. It is also very important to understand that while you as a new owner will get a new lease, the rent amount itself is unlikely to change in a major way (and if it does change it will probably go up, not down) – especially if the current lease has quite a bit of time left. The property owner already has someone who is committed to paying that rate for the remainder of the lease term, so they have no motivation to change the terms of the lease for a new owner.

 

Commercial lease rates depend on a large number of factors, but in general it will depend on where the business is located. In some parts of town you may be able to get a commercial lease at $8 per square foot, while in another part of town not far away the typical lease rate will be more like $40 per square foot. A property on a main street or in a plaza with a strong anchor business will fetch higher rent than a business somewhere off the beaten path. A location on the water will also have a higher rent rate.

 

If you are in the initial phases of searching for a business and think a particular rent rate looks ridiculous, don’t make a judgment on the business or the lease until after you have spoken to your business broker. They will be able to tell you if a lease rate is truly ridiculous, or (more likely) if a lease rate is in line with the current location of the business. It is also far more important to look at the cash flow of a business than to get hung up on the lease.

 

In terms of renegotiating the lease rate, it will depend on a number of factors – like the length of time left on the current lease and other factors (like location) that we’ve already discussed. In some business transactions there will be a little wiggle room on price – but for the most part a property owner is not going to cut a lease rate significantly for a new business owner.

 

While you won’t be able to cut the lease rate in half, you will more than likely get a chance to renegotiate other parts of the lease, like the length. For instance, if the current owner only has six months left on their commercial lease, you certainly can’t be expected to pay $100,000 for a business with no guarantee on the current location for anything more than that short amount of time. Your lease will likely be renegotiated for a much longer term, sometimes 5 or 10 years. Each situation and each property is different – so you will need the expertise of your business broker for this part of the renegotiation.

 

If you are new to the process of buying a business, don’t get hung up on seemingly high lease rates or on short lease terms. Your business broker is there to help you understand any lease and also to renegotiate a lease to best suit your interests as the new owner of a business.

 

Are you searching for businesses and have questions about why certain lease rates are so high? Do you want to know which areas typically have lower lease rates? Ask us! Please leave any questions or comments here and we will 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 Buyer? Must-Haves – The Right Help

 

If you are considering taking the plunge into entrepreneurship by buying a business, you should know that the best way to be a successful business buyer is by using all of the resources available to you – namely the experts who can help you along your path.

 

Why do I need help? Aren’t experts expensive? Wouldn’t I be saving a ton of money by buying a business on my own?

 

You absolutely, positively need to have the right help when making a purchase as large and life-encompassing as buying a business. That help needs to be experienced in their field and have the knowledge to properly guide you through the business transaction process.

 

Going it alone may seem like a good idea because there aren’t any fees or commissions to pay, but you will more than likely end up in hot water if you don’t know what you are doing – and that can mean way more money spent cleaning up the mess on the back end than you ever would have spent hiring the right help.

 

What kind of hot water could you end up in? You could be shut down if you don’t handle licensing and permitting issues correctly, you could end up signing a purchase contract that doesn’t cover what you thought it did, you could end up discovering surprise debts the business owes after you’ve signed on the dotted line and that business is now your problem alone – just to name a few. In addition, most businesses you buy do not come with the corresponding real estate, so a commercial lease will need to be negotiated – and commercial property managers are notorious for being difficult, more so if they feel like you don’t know what you are doing.

 

What should you do instead? Employ the right help, they will be worth their weight in gold.

 

What help might I need

 

A Business Broker

 

This person will be the main adviser you use for the purchase of a business. They will assist you with your search, help you obtain the information needed for due diligence, help you make sense of the numbers, negotiate with the sellers for the best price, negotiate and play middle-man with the landlords and property managers, help you get the appropriate licenses and permits, help you transfer utilities and vendor contracts – the list goes on. A good, experienced business broker has already seen everything that could possibly go wrong in a business transaction, so they can help you avoid the pitfalls and come out with the right business for you.

 

A Business Transaction Attorney

 

Notice we didn’t just say “attorney”. A family law attorney will do you no good in a business transaction in the same way a plastic surgeon isn’t going to be of much help if you have back pain. An attorney who specializes in business transactions will be best equipped to help you navigate your purchase contract and help you on closing day.

 

A Business Transaction CPA

 

Again, we didn’t say just “CPA”. Not all accountants are familiar with the very tangled web of numbers one finds in a small business. The one or two numbers on the bottom of a tax return are not going to tell you everything you need to know about how much money the business makes. For example – has depreciation been taken into account, have the personal benefits of vehicles and cell phones been added back, has the value of the inventory been accounted for? Having a CPA who has business transaction experience will be your best bet for understanding the numbers.

 

The moral of the story? Your best bet for the successful purchase of the best business for you is to have the right help along the way.

 

Have more questions? Don’t believe us? Leave questions, comments or concerns here and we will be happy to talk to you more.

 

 

 

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 Value Of Your Future Life

Figuring out what a business is worth is a difficult thing – especially if you are a first-time business buyer.

 

What do the last several years of tax returns say about what the next few years might be like? How much is the inventory worth? Should you even care what the inventory is worth? How much cash flow does the business generate? What kind of monetary benefits does the current owner get from the business? What are multiples and how were they used to come up with a price

 

These are all great questions that you and your broker will discuss when deciding if a particular business is worth what they’re asking. You’ll also use the answers to those questions to decide if a business fits with the goals you have for business ownership. What you may have noticed about this list of questions is they all have a numerical answer of some sort. Businesses are, however, far more complex than just numbers can explain – so let’s look at one marker for value that you may not have considered – the value of your future life.

 

 

Two businesses may appear nearly identical on paper – but in terms of value to you as a buyer and in terms of list price they may be very different. Why? One business has far better non-monetary benefits for the owner than the other. Here’s an example:

 

There are two nearly identical pizza shops in the same area of town. They both generate $100,000 a year, but in one the owner works 80 hours a week – the other owner only works 20 hours a week. Which shop would be worth more to a potential buyer? The one with the vastly better work schedule, right?

 

There is far more to owning and running a business than just the numbers. You are buying yourself a job and a lifestyle, and for a better job and lifestyle you are probably going to have to pay more. The day-to-day schedule of the current owner, having a strong management structure in place that allows an owner to do things like take vacations – these bonuses are going to cost you more up front, but will give you as an owner a far better lifestyle down the road.  

 

These non-monetary benefits can be hard to put a number on when deciding if a listing price is fair or deciding what to offer the seller, but they are an important part of the value of the business and can’t be overlooked. Talk to your business broker about how to put a value on these perks when drafting your offer. They will be able to help explain the nuances of a particular business listing price.

 

Are you looking at businesses to buy and feel like the prices are all over the map? Do you have questions about how to evaluate listing prices? 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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Last-Minute Greed: The Business Deal Kiss Of Death (And How To Avoid It)

 

Buying or selling a business is a large undertaking. From start to finish it can take months of back-and-forth to reach and agree on a deal. One you get to that point, where a purchase contract is ironed out, you should be able to coast through the home stretch – right? Not always. This home stretch period should be a breeze, where sellers tie up loose ends and buyers get geared up to take over the helm – but in many transactions something strange happens. Last-minute greed.

 

What do we mean?

 

Buying or selling a business typically involves large amounts of money changing hands. It is completely normal to get 11th hour cold feet and panic for a moment with the thought that you are either paying too much or aren’t getting enough. Maybe you came to this thought on your own, or maybe a friend or family member has chimed in late to say they think you’re getting ripped off.

 

Momentary panic is one thing, but if you let this fear get the better of you it can have disastrous consequences.

 

For instance, in this panicked state you call your broker and demand to put the deal on hold while you reconsider or demand to head back to the negotiation table. The other side of the transaction is then appalled at your insinuation that the deal has somehow (very suddenly) become unfair and balks at the suggestion that you renegotiate. Guess what? Your deal is probably dead

 

You have spent weeks and months negotiating, looking at numbers, pouring over books – and after all of that you have arrived at a number that both sides agreed was fair. Why the last minute doubt?

 

It’s just cold feet. The way you are feeling is completely normal, but remember that while you were in a more rational state of mind you decided that this deal was one you wanted. It was a deal you thought was fair. You have had many conversations with your broker, with the other side – and you felt comfortable moving ahead. Everyone always wants the most they can get for their money, and business transactions are no different. The emotional swings are just larger because there’s more money involved.

 

Last-minute greed isn’t going to get you a better deal. It’s more than likely going to end with no deal at all, and a colossal waste of time for everyone who’s been involved – including you. We’re not saying that you should agree to a deal that’s unfair. What we are saying that if you were fine with a deal until days or moments before the money starts changing hands – you’re probably just momentarily overwhelmed.

 

If you do suddenly feel like the deal isn’t right and you should be either paying less or getting more – give your broker a call. They’ve seen 11th hour panic many, many times and can help walk you through the ramifications of trying to renegotiate with the other side. They’ve also seen deals where something does come up at the last minute that requires renegotiation – and they can help you decide if that’s really the scenario you’re in.

 

Don’t destroy a perfectly good business opportunity because it’s scary to take a big plunge. Look to your broker for help, and do your best to remain calm and rational all the way to closing.

 

Are you thinking about buying a business but are worried about writing such a big check? Have you considered selling your business but want to know how you decide if an offer is fair? Do you have a story about last-minute greed in a business transaction you think would help other buyers or sellers? Feel free to leave any questions or comments here, 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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