what should i know about buying a business Archives - Page 18 of 29

Published June 29, 2020

Living in southwest Florida definitely has its perks, even in the middle of a pandemic. We still have year-round summer, white sand beaches and a relaxed lifestyle.

Our small businesses have adapted to the new normal and the business market has many new opportunities for those who may be ready to make the jump to entrepreneurship. If this year’s events have you rethinking your life choices, now is a great time to buy a business.

If you live outside of the area and are considering a move to the sunshine state as an entrepreneur, here are a few pointers you should consider before you make a trip down.

Buying a business is absolutely nothing like buying a house.

Many folks come to the business market with the mindset that the process will be very much like buying a house – but nothing could be farther from the truth. If finding a home is the goal of your trip, you might call a local real estate agent and ask them to set up a dozen or so homes to see a day or so before you jump on a plane, but if you try to do the same thing with buying a business you will be completely out of luck.

You must, must, must plan ahead.

The process to buy business has many steps, and starts with contacting a business broker. This first step should come long before you’ve even bought your plane ticket. You and the local broker should have a conversation about your goals for business ownership, your work experience, how much capital you are planning to invest and the industries that interest you. Your broker will then send you listings that fit with your goals and will ask you to review those listings and narrow down your choices. Once you have two or three listings that appeal to you, you will be asked to sign a non-disclosure agreement (NDA) for each listing. Once the NDA is signed and submitted to the listing broker, you will be sent the marketing package – complete with the name and address of the business in question. You and your broker will review each package and come up with a list of questions to ask the sellers, which you will have an opportunity to do once a conference call is set up. After the conference call, if you are still interested in the business, a tour of the physical location can be arranged but will have to be coordinated between your travel schedule, the schedule of the business (for confidentiality reasons buyers can only see a business before or after hours when no employees or customers are present), the schedule of the sellers, the schedule of the brokers involved and considering the social distancing measures that must be in place.

Doesn’t sound like something that can be done or thrown together in a day, does it? That’s because it can’t.

It is very common for a buyer to call us on a Friday to say they are catching a plane the next day to visit some businesses over the weekend – and then they are upset when we tell them their request is impossible. If you are serious about buying a business you will need to go through the proper steps and plan visits to businesses long before you set foot on a plane. Business transactions are inherently complex and require lots of moving parts, so you need to both plan ahead and be flexible.

But I’m planning on writing a very big check to buy a business, why can’t you accommodate me?

It’s not that we are trying to be difficult; it really is that last minute requests are completely impossible – especially right now. We also don’t want to waste your time taking you to businesses that don’t fit with what you are hoping to get from business ownership. The process works, and if you follow it you will be better set up for success in your new business venture.

Are you considering a move to southwest Florida? Do you have more questions about the process and want to know how to get started? Would you like to know what measures we currently use to ensure safety during site visits? Ask us! Leave us any questions or comments here, and we would be happy to help.

Michael Monnot

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

Is It Crazy? Help With Business Listing Prices

Posted in Become a Business Owner, Business Broker Why & How, Buyers Articles

Published June 22, 2020

If you’re new to the business buying marketplace you will probably notice something right out of the gate as you begin your search – listing prices seem like they’re all over the map.

How are you supposed to figure out if the listing price is fair?

While initially confusing, the listing prices of businesses can and do make sense in most cases – you just need to know how to look at the number the seller wants objectively.

Your best bet as a new buyer is to get some professional expertise on your side. Talk to a qualified business broker about some of the business prices you’ve seen and ask for their input. The listing price of a business can be a very nuanced thing. It’s often based on cash flow, but sometimes metrics like industry standard multiples, values of equipment and inventory, what comparable businesses have recently sold for, etc. can be part of the equation that leads to a listing price. Experienced eyes will be necessary to tease out the important details and help you decide if what a seller wants is fair – or well beyond the realm of reality.

Why would someone list a business for a crazy high price? Sometimes those sellers are more interested in being told what they want to hear than they are interested in selling. Sometimes they are listing just to see if someone will make them an offer. In some cases these sellers will negotiate with buyers who come up with a fair and justifiable offer, but if they won’t – it’s probably time to move on. An extreme price can be a red flag that it will be very difficult to put a deal together.

A realistic seller will be able to back up the number they’ve asked for. They will have the financial documentation that shows their request is legitimate. These sellers are willing to negotiate when presented with a fair offer, because ultimately a business is only worth what someone is willing to pay for it. This does not mean that you as a buyer should throw extreme low-ball offers to see if they stick. A small business is someone’s blood, sweat and tears. The personal attachment to all of that work means that it is relatively easy to offend a seller to the point that they will refuse to work with you. Just as you would like the listing process to be fair – you need to return the favor and offer a fair price.

The message here? Enlisting some professional guidance will be essential in helping you navigate the listing prices of the businesses on the market. Once you’ve determined that a business is what you want – put together a fair and justifiable offer.

Are you just starting your business search and want to know what’s out there? Click here to search for current listings! Would you like to know more about how businesses are priced? 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
5111 Ocean Boulevard, Suite E
Siesta Key, FL 34242

What Can You Realistically Afford? Thoughts For Business Buyers

Posted in Buyers Articles

Published June 15, 2020

We all have big dreams. A bigger house. A nicer car. Lavish vacations. Your own private island. What keeps these wonderful flights of fancy in the realm of dreams is the fact that we just can’t (currently) make them happen.

Big dreams can become a big problem in the small business market. Why?

New buyers will often consider businesses that are completely out of their price range – like drastically so.

Why do many new business buyers have unrealistic expectations? It may be, in part, because of the way people buy homes.

When you go into a bank to get a mortgage, you might walk out with a pre-approval for $750,000. Does that mean you have $750,000 in the bank in cash? Nope. It just means the bank is willing to loan you that amount because they can take back your new house as collateral if you don’t pay them back.

Small business transactions don’t work that way. There are financing options if you don’t have a huge amount of cash available – but that financing is very different than what you see in the housing market. You might be able to get a loan from the Small Business Administration (SBA) or from the seller of the business via seller financing – but no matter where you get your loan you are going to have to put up a large down payment and prove that you have the capital to both get through the transaction process and sustain yourself as the new owner of the business.

What do we mean by that? The business buying process can be expensive. If you get a loan from the SBA, they are going to require an appraisal of the business – one you as the buyer have to pay for. There are application fees for SBA, as well as application and licensing costs associated with the licensing requirements for your new business. If your future business is in a commercial space, your new landlord is going to want first-last-security and to see your financials to assure them you can not only pay those initial costs, but be able to pay your rent going forward. You might need capital for payroll in the first few weeks or months. The list can be long and pricey.

This doesn’t mean you can’t fulfill your dream of buying your own business. It just means you need to be realistic with what you can afford. If you only have $50,000 to spend, you shouldn’t even look at a business that is $750,000. It can’t happen. What you can do is find an affordable business that you can grow. Smaller, more affordable businesses can be very successful – and have lots of room for that all-important growth.

If you want to know what you can realistically afford, ask an experienced and qualified business broker. They can look at your current financial situation, your goals for business ownership and your previous experience – then assist you with finding the right business to buy. The right business will both meet your goals and keep you from extending yourself beyond what is currently financially possible.

Have you always wanted to buy a business but aren’t sure what you could afford? Would you like to know what types of businesses are currently on the market in your price range? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

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

Get Ready For The Google: Why Buyers Need To Think About Their Online Reputation

Published June 8, 2020

You have the capital ready, you’ve found a business you like and you are ready to write the check. The seller finds out who you are and then suddenly the deal is dead. What happened?

They Googled you.

When you buy a small business, you are buying something that the former owner spent their blood, sweat and tears for. You are getting the employees they care about, the business reputation they built. Who you are as a person, what you bring to the table in terms of stability and the ability to cement the future of the business they care about matters. It matters more than you may have considered.

While you and a business seller don’t have to be best friends or even agree on most things that occur outside the realm of running the business, what your online reputation says about you absolutely has the potential to sink a deal.

Try this. Look yourself up. What’s out there with your name attached?

Most people don’t have the celebrity-esque issue of having negative news articles all over the internet. That isn’t the problem. What most people have is their social media life. Your Facebook page. Your YouTube channel. Your Twitter account. Your blog. While this realm of your social life was probably intended to be for personal use only, it will absolutely impact the way a business seller thinks about you. It might even make them decide they don’t want you to buy their business.

But my LinkedIn page is very professional. Isn’t that the one that matters?

Not really. While most people aren’t posting long political rants or inappropriate memes on their “professional” online profiles – many people do on “personal” sites. The problem? Those personal thoughts, jokes and comments can be just as easy to find as your carefully curated professional page.

What can you do about it? Google yourself long before a prospective business seller does. See what’s public and make it private. Find what, in retrospect, wouldn’t be considered appropriate for a professional reputation and delete it. Clean up your online presence – immediately.

You would do a similar purge of your online presence before applying for a new job, as it is common knowledge that employers absolutely look people up – and there are many, many stories of poorly thought out posts sinking employment opportunities. The same protocol should be in place when you buy a business because you are essentially buying yourself a job. Do the work ahead of time and curate your entire public online presence before it’s too late.

Have you considered your online reputation s a business buyer? Would you like to know more about what business sellers are looking for in a prospective buyer? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

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

What Does The 10% Look Like? Thoughts For Business Buyers

Posted in Buyers Articles

Published June 1, 2020

As a business buyer, it is critically important that you stand out from the crowd. Why?

Up to 90% of prospective buyers who enter the business market never buy anything.

If you consider this statistic from the perspective of a seller or business broker it looks like this – 90% of the buyers who initially contact you will wind up a complete waste of your time.

If you are serious about buying a business, you need to make yourself stand out as a part of that all-important 10% of buyers. How do you do that? Think about who someone in that 10% is.

What does the 10% look like? Well, like everyone. A business buyer ins’t best described by demographic data – a business buyer is simply someone who buys a business.

While this statement might initially sound obvious, preconceived notions about what a business owner looks like can perhaps unconsciously hinder those who could truly be successful entrepreneurs from entering the marketplace. If you’ve always been unhappy with your professional life and have always felt like you could do better if you were the one in charge – you probably could. Running your own business isn’t any harder than going to a job you absolutely hate. The difference is at your own business the buck stops with you. If you have the drive, grit and creativity to push your business into tomorrow you can be just as successful as the person who climbs the corporate ladder for someone else. The difference is when you get to the level of success you were looking to attain – as a business owner that success is yours.

Ok, so I hate my job and I want to be my own boss. How do I get myself into that 10%? It’s incredibly simple. Act like a serious buyer.

Serious buyers are willing to sign non-disclosure agreements without a fuss. They understand that they are receiving privileged and confidential information about someone’s business and they respect that confidentiality. Serious buyers take the information they receive and put together a fair offer that has justifiable terms. They don’t waste everyone’s time by throwing in a ridiculous low-ball. Serious buyers also know that the best way to find out what they need to know to make an informed decision is by asking great questions.

The message here? The world of small business ownership is diverse. Your actions are what make you an entrepreneur, so use those actions to make yourself stand out.

Are you a business buyer who would like to know more about the process of buying a business and standing out from the crowd? Please leave any questions or comments here and we would be happy to help.

Michael Monnot

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

Buying A Business In The Post-Quarantine Economy

Published May 25, 2020

Can you still buy a business in the post-quarantine economy? Absolutely. The keys to success are adaptability and creativity.

Everyone can agree that the past few months have been difficult, unprecedented and just plain strange. If you were thinking about changing career paths before the quarantine hit, or if the time trapped in your house made you rethink your life choices – you might be wondering if now is the time to make the switch to entrepreneurship.

It certainly can be. While some segments of the economy are currently struggling, there are a few key industries that are booming. Think about what people are using/needing and you can come up with a whole host of ideas. Here’s a few:

grocery stores

liquor stores

health care and health care supply businesses

waste disposal

cleaning services

laundry

auto repair

delivery services

The list of newly named “essential businesses” is a long one. If you were thinking about making the switch to business ownership then a business in the “essential” sector is a good buy.

If you had your heart set on a different industry, you might still be able to make it work by adapting your business model and the business you purchase to fit with the times. For instance, if you’ve always wanted to own a restaurant you could perhaps find an existing restaurant to buy and change the model to a take out counter that also offers retail food options like fresh baked bread and other staples – making your business a one-stop shop.

The key to success in 2020 is adaptability and creativity. If you have that and are willing to put in the hard work – business ownership can be a very successful path.

What about all of the news about struggling small businesses? Yes, there are businesses out there who will not make it back. Many were faltering anyway, or didn’t have a business plan or model that could survive the shut down. The silver lining? Those struggling businesses might be a good buy for future entrepreneurs. Some businesses that have decided to remain closed permanently will likely be offered as asset sales, while those who don’t show the best numbers over the last few months might be purchased for a discounted price. Talk to your business broker about the pros and cons of snapping up a currently struggling business to see if the effort it would take to pull the business back from the brink aligns with your goals for business ownership.

Are you considering the jump to business ownership? Do you have more questions about what industries would be a great buy right now? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

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

Is Now The Time To Buy? Making The Jump To Business Ownership In 2020

Published May 18, 2020

This year has been a strange one. The news changes minute by minute, and the pandemic still overshadows daily life. You’ve had a chance to reflect for the first time in a long time – and now you know entrepreneurship is your path.

Is this a good time to make the jump to business ownership? Absolutely, yes.

It may have seemed like the world ground to a screeching halt, but business has been happening all along. Essential businesses like manufacturing and delivery services have been booming. Small businesses with the creativity to pivot to fit the times have done well.

Many small businesses have had to scale back, but they are ready and able to scale up as soon as the situation allows.

What does this mean for you as a future entrepreneur? Now is a great time to consider buying a business.

Why buy? Starting from scratch, from the ground up – is tough when times are great. Right now a start-up would probably be even more difficult to get off the ground. People aren’t looking for new. They’re looking for a return to what they know and miss. An existing business gives them that.

Buying an existing business also gives you as a buyer some stability as well. You know the business model works because the business is currently running and generating cash flow. You know it’s a business that is well-run with an eye on growth and creativity because it survived the rise and fall of the economy. These proven features of an existing business just don’t exist with a start-up.

I want to be an entrepreneur, but I have my own concept that I think would work. Why would I buy something else?

Your concept might be great, but you can’t know for sure if it works. If you’ve considered entrepreneurship, you should consider purchasing a business instead. You get handed the keys to something you know can and does work, you get training from the seller so you know what to do and you get an existing brand that people will be excited to come back to. If you really have your heart set on your own idea, perhaps the smarter move in these unprecedented times is to buy an existing business in an industry where you could make your concept a reality. Take some time to figure out how to implement your idea within a business model that is tested and successful, then roll it out carefully to see if it really works.

This year might be a strange one, but it can also be a year of positive change. If you’ve always dreamed of business ownership, now is a great time to get started. Talk to an experienced and qualified business broker about your goals for business ownership and they can help you search for the perfect business for you.

Have you always wanted to own your own business but don’t know where to start? Has 2020 made you rethink your life choices? Would you like to know more about the process to buy a business? Please leave any questions or comments here and we would be happy to help.

Michael Monnot

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

The Right Advice At The Right Time: The Role Of Attorneys In Your Business Transaction

Posted in Buyers Articles, Sellers Articles

Published May 11, 2020

Let’s start this one off by saying we are absolutely not advocating an attorney-free business deal. A business transaction involves contracts that you will need to sign and a lot of money changing hands – so the assistance of an attorney is absolutely necessary.

Business transactions, however, are also inherently very complex and businesses themselves involve a decent amount of risk. If buying a business gave you a 100% chance of getting a fabulous return on your investment then that’s what everyone would do. Buying and running a business means a fair share of risk and plenty of hard work.

Before you bring your attorney into the mix (which you will definitely need to do), ask yourself this important question – what do they do for a living? They protect you from any and all risk.

It is impossible for your attorney to keep you from any and all risk and also give you a thumbs up on a business. It is because of this conflict between what a lawyer does for a living and what you are trying to do (buy or sell a business) that we are suggesting that you keep their advice to only the portions of your deal that they specialize in.

What do we mean by this?

Your attorney doesn’t need to be giving you advice about price. Determining what a business is worth in the current market isn’t what they do. They don’t know how to derive value from cash flow or how to price a business based on what comparable businesses have actually sold for.

Your attorney shouldn’t have a major role in negotiations. At the end of the day, a deal is happening between the buyer and the seller. These two parties will have a tough time coming to a consensus – even when using intermediaries like business brokers who act as buffers. Adding more voices and opinions to the mix by having attorneys intimately entwined in the negotiations might mean no deal will ever be reached. It becomes a “too many cooks in the kitchen” scenario.

I get why my attorney might cause problems, so what should I use them for?

Again, your attorney will be instrumental in putting together contracts and advising you of your risks in association with these contracts. You should absolutely listen to what they have to say in regards to these parts of a business transaction that are very much their specialty. You should listen to their advice, weigh what they have to say based on the fact that their job is to protect you from risk – and then use common sense to make up your own mind about what you should do.

A note here. You should also be using a business transaction attorney for this role. Your family law attorney (for example) isn’t going to understand your business contracts the way a business transaction attorney does. It would be like going to the pediatrician to get plastic surgery – it isn’t what they do. Finding and using a business transaction attorney with some experience in this very unique process will be pivotal to success.

Keeping a business transaction as simple as possible is the only way to successfully navigate a process that is inherently complex. Use each advisor for the role where their advice is the most appropriate and you will have a far better chance of transaction success.

Are you a buyer or seller who wants to have their attorney involved in everything? Do you have more questions about why this might be a problem? Ask us! Leave any 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

All The Way To The Finish Line – Why You Need A Great Broker

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

Published May 4, 2020

Both parties have agreed on the purchase contract, you’re finished – right?

Not quite, and if you have a business broker who isn’t going to push your deal all the way to the finish line – then your deal could be in trouble.

A contract does not mean the deal is done, it just means one step in the process has been completed. We have a very high closure rate once our deals get to contract – 70-80%, but most business brokers can’t get anywhere near that number.

Why?

Once the contract piece of the puzzle is done, many brokers walk away and let the deal fend for itself. They let things like licensing, SBA loan issues and follow-thru with details fall by the wayside – and when this happens a minor issue can become a major deal-breaker in no time.

A transaction isn’t closed until it’s closed.

Why would any broker let this happen? Once the contract is put together, most brokers think that their work is done, but the last few details are often the most important. Our process is different because we do an immense amount of pre-due diligence. We have all of the ducks in a row and have rooted out and dealt with many of the issues that come up at the end long before they become potential deal killers. Then, we don’t stop until the deal is done.

Let’s focus on just one of the often-overlooked last-minute details to give you an example of the importance of getting all those final ducks in a row:

If you as a buyer have no idea what the licensing requirements are for the business you are about to take over, how can you possibly have all of those requirements complete on the day you get handed the keys? Any business transaction means that at the very least all licensing must be transferred from the old owner to the new, and many of these licenses come with an inspection requirement that needs to be fulfilled before the business can serve customers. What does that mean if you don’t complete the necessary applications and inspections before the day you take over? You can’t open the doors until they are all complete, so having a broker who is on top of issues like licensing will be crucial for a successful transaction.

If you are a seller who offered seller financing, then it is in your best interest for the transition to the new owner to go smoothly. An incomplete licensing, permitting or inspection requirement will put the transition and the future of the business in jeopardy (meaning you won’t be able to get paid). Having a broker who is proactive on the licensing front (and all other fronts, for that matter) will mean a more successful transition to the new ownership and a far better chance for the new owner to find success right out of the gate.

Ask your broker how many of their deals make it to closing once the contract step has been reached. Their answer to this question will tell you all you need to know about their follow-through and whether or not you’ll be able to make it to the closing table.

Are you buying a business and want to know more about the process to transfer licenses? Are you selling your business and would like to know what aspects of your transaction will need to be followed all the way to the end? Please feel free to leave any questions or comments 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

Looking To Buy? An Essential Business Might Be For You

Published April 27, 2020

It’s something that we’ve discussed in these articles many times – the need to base the decision of what business would be right for you not on aesthetics, but on whether or not the business meets your goals for business ownership. Many of us have a picture in our head of what our ideal business would look like, but that doesn’t mean that type of business is going to be a good choice.

Now that we are all living in the pandemic-led business climate – that picture in your head may need to shift.

Shift to what? An essential business.

Our current reality has thrown a bright spotlight on those businesses that are essential for everyone – to eat, maintain basic hygiene, get adequate medical care, protect themselves, etc. What does this mean to you if you’re a business buyer? That perhaps a wise choice for business ownership is a business that everyone needs. Delivery services, food and beverage based retail, online shopping and the manufacturing of supplies are all good avenues right now.

The ability to pivot in times like these is often the difference between success and failure. Although you may have had your heart set on a particular type of business, reality might mean you need to shift your business choice based on achieving your business ownership goals – instead of chasing the picture you had in your head.

This doesn’t mean you can’t buy your dream business. It does mean you need to reevaluate why that business was your dream business in the first place.

Were you considering that type of business because it seemed like a fun lifestyle? The perceived lifestyle of a business owner is often drastically different from reality – so ask yourself what about that perceived lifestyle is so appealing? Is it the ability to set your own hours? Is it the ability to work from home? Is it the amount of money you will be able to make? Again, what are you hoping to get out of business ownership? The answer to that question might point you in a direction you hadn’t considered – and the smart buy would be an essential business in that direction that meets your goals.

What if the business I’m considering isn’t currently functioning as an essential business, but could be? As the new owner you can absolutely implement your own ideas that can both help your local community and keep your business in good shape.

Are you looking at buying a cafe? Perhaps you could implement a drive-up system for take-out or hire a temporary delivery driver. Are you looking at a retail store? Stock the items that people currently need and offer curb-side pickup and/or delivery as well. Are you considering a manufacturing business? What does the local economy currently need? Could you divert some of your resources to fulfill that current need? You get the idea.

As a soon-to-be small business owner you need to be thinking about how to keep your new venture in the black in these unprecedented times. Creativity and the willingness to pivot when a sudden shift is needed will likely mean the difference between success and failure in the new normal. The same attributes will also mean a possible reevaluation of your prospective business choices.

Are you considering buying a business but aren’t sure now is the right time? Does the current situation have you thinking an essential business might be right for you? Please feel free to contact us today. We would be happy to help you make the best decision for you. Leave us any questions or comments!

Michael Monnot

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