A Fair Price Or Are They Dreaming? Small Business Listing Prices

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

Published January 28, 2019

 

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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Market Confidence Drops While Prices Rise – What’s In The Tea Leaves?

Posted in Buyers Articles, Sellers Articles

Published January 21, 2019

 

Buyers and sellers aren’t sure what the future of the business market holds, so what does 2019 mean for those who are thinking about buying or selling a business?

 

While 2018 numbers have yet to be released, the results of the 2017 BizBuySell Buyer-Seller Confidence Index might give insight to those in the business marketplace.

 

The BizBuySell Buyer-Seller Confidence Index analyzes the survey responses of 2000 entrepreneurs. The Index is based on a score from 0 to 100, where 100 is the perfect market for buying or selling a business and 50 is a neutral response.

 

The 2017 Seller Index was down from 59 in 2016 to a score of 58 – meaning sellers are still confident that the market is in their favor, but that the positive vibes might not continue as many sellers are concerned that we are reaching a peak. Anyone who owned a business before the 2008 financial crisis remembers the boom before the bust – and with business prices inching higher and higher it’s hard to know when the market will top out.

 

Buyer confidence is down as well, from 49 to 46, but this drop is likely linked to rising business prices. Buyers have been lucky in recent years, with the 2008 recession driving business prices to bargain basement levels. In 2013 the small business market began to show signs of life, and prices steadily grew as the economy improved. Growing small business revenues have meant higher sales prices for buyers, leading to a drop in confidence that there are good deals for low capital investment. The drop may also be linked to high listing prices, as many prospective business buyers feel that many businesses are overpriced.

 

Although some sellers are definitely trying to take advantage of a market in their favor, most businesses are listing high because they are reporting very strong numbers. Buyers looking for a steal probably aren’t going to find one, but those buyers with the financial means to grab a business today will be getting a healthy business instead of a project on the brink.

 

What’s in the tea leaves for 2019 and beyond? Who knows. This booming market can only last so long, and with the slight drop in confidence on both transaction sides it may be coming sooner rather than later. The best advice is to sell now if you’re thinking about selling, and buy now if you want a business in the black.

 

Do you have more questions about the current state and possible future of the small business market? Contact us today 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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Miserable At Work? Mid-Life Crisis? Buy A New Life By Buying A Business

Posted in Become a Business Owner, Buyers Articles

Published January 14, 2019

We all get burned out. Burned out at work. Burned out in relationships. Burned out on life in general.

 

You feel like you need something new, something exciting to turn your life back towards happiness – but what new adventure can make this happen?

 

A hot new car? A brand new boat? Sure, these toys can be fun – but will they really bring you life-altering satisfaction? Probably not in the long run.

 

 

The happiest people are typically people who have followed their passions. They wake up every morning with the drive to do what they do because they love it – not because they have to. If you are truly dissatisfied with your career because deep down you always wanted to pursue another passion – maybe now is the time to make that change. Maybe making the jump to entrepreneurship is for you.

 

Entrepreneurs are a unique breed. They are willing to take risks. They have drive and passion. Best of all, they get to do what they love and don’t have to answer to anyone but themselves. Sounds good, doesn’t it?

 

The good news is you don’t have to make the jump to entrepreneurship by starting from scratch. Start-ups are notoriously tough, expensive and risky. You are developing an unproven product in an unproven location using unproven operating methods.

 

You can make your life easier by buying an existing business instead. With an existing business you remove the unproven part of the equation. You get to walk into a business with a proven product, location and operating procedures. You also get a previous owner who will train you before you take over the reins.

 

There are many, many businesses for sale from multiple industry sectors – so if you’ve ever considered following a passion in the small business world, there is likely a business out there that will fit well with your goals. Try a cursory search by clicking here, and then have a conversation with us about your goals for business ownership, the types of businesses you think you’d like and the capital you have to invest. You and your broker can then narrow the search to just those businesses that will be right for you.

 

We aren’t saying that an existing business is without risk or that an existing business won’t be a challenge. Owning a business, whether you started it or not, takes dedication. The hours might be long and the work might be hard – but all of your time and energy are spent working for yourself instead of for someone else.

 

Is small business ownership for you? It could be, and it could be the key to a happier life. The only way to find out is to start looking. Skip the new car and invest your money in a business that could bring you not only financial returns, but a better quality of life.

 

Would you like to know what types of businesses would fit with your goals? Do you want to know what your dream business would cost? Ask us! Please 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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Why A “Used” Franchise Is Better Than Brand New

Posted in Become a Business Owner, Buyers Articles

Published January 7, 2019

In our society, the word “used” typically carries with it a less than ideal connotation – it means that someone else got the best and the “used” buyer is left with what’s left.

 

In the business world, however, “used” gets a boost because a “used” business is an existing business. Existing businesses are good.

 

If you are thinking about getting into the franchise ownership game, you will have to initially decide if you want to start a new franchise location or try to find an existing franchise location to purchase.

 

 

If this is your first business or your first franchise – then buying existing is probably the best option.

 

Why?

 

An existing location is proven.

A franchise location that already exists and is currently running is far less of a gamble than putting a brand new franchise in an unproven location. An existing location also has an existing staff and it’s own established daily operations. There won’t be as much guess work for you as the franchise owner because there will be a seller there to train you as to what works and what doesn’t at that particular location and with that particular staff. An existing location is turn-key instead of starting from scratch.

 

An existing location has records.

Another major benefit only an existing location will have? Records. Deciding how much a business is worth to you as a buyer is far easier if there are records of the cash flow and finances of an already existing location. Buying new means a great deal of guesswork as to the future projections on your investment.

 

An existing location already has customers.

You might be considering a franchise because it comes with the added benefit of an already loyal customer base. The brand will definitely get people in the door, but and already established location will come ready-made with regular clientele.

 

An existing location offers flexibility during negotiations.

When you start a new franchise location, there are often strict rules and fee structures you must abide by – and very little (if any) room for negotiation. When you buy an existing franchise, there will likely be fees associated with an ownership transfer, but the price you pay and the terms of your deal will be largely in the hands of you and the seller. This may allow you some wiggle room in terms of price and contract terms, but this will depend on the franchise itself.

 

If a franchise is the business path for you, don’t get hung up on the “used” nature of an existing location – for most buyers it can be a far better bet. Ask your business broker about what franchises are currently available on the market and about the terms required to take over an existing franchise location.

 

Do you have more questions about how the process to buy a franchise differs from buying an independent small business? Do you want to know what the purchase of a franchise might cost? Please feel free to leave any questions or comments here and we would be happy to help.

 

 

 

Michael Monnot

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

www.InfinityBusinessBrokers.com

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Borrowing From Family To Buy A Business? A Few Considerations

Posted in Become a Business Owner, Buyers Articles

Published December 31, 2018

We’ve all had those pie-in-the-sky conversations at the dinner table over the holidays, when the discussion turns to entrepreneurial ambition and your uncle/grandmother/father says something along the lines of “Sure, I can help you buy a business!”

 

When considering borrowing money from family members (or from anyone with whom you have a personal relationship), there are a few things you should consider.

 

Buying a small business is a very expensive venture, where you will need working capital in addition to the amount you offer because of necessities like licensing fees, lease deposits, payroll and initial inventory – just to name a few. What your relative initially considered loaning you/investing in you will probably not be enough, so they will likely need to write a much bigger check then they had imagined.

 

They will also need to provide financial records to business brokers, sellers, landlords and property managers – even licensing agencies in some cases. This can be uncomfortably intrusive if the business in question isn’t even yours.

 

If these considerations have you possibly rethinking borrowing from family, just remember that you absolutely can borrow from family successfully – there just needs to be good communication between both parties and a contract of some kind to ensure everyone is happy in the end.

 

You can also ask your business broker about other financing options that may be available.

 

You and the business you are interested in may qualify for financing through the Small Business Administration (SBA), for example. Want to read more about this financing option? Click here to read Business Buyers: A Guide to Financing and the SBA (U.S. Small Business Administration).

 

In most cases seller financing may also be an option, allowing you to purchase a business with help – but without the personal strings attached. Want to read more about this financing option? Click here to read The Business Buyer’s Guide to Seller Financing.

 

Were you considering family financial help, but now think a SBA loan or seller financing might be a better way to go? Do you have questions about what a family loan contract might look like? Ask us! Please feel free to 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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Tick, Tock – Why Business Buyers Need To Make The Most Of Due Diligence

Posted in Become a Business Owner, Buyers Articles

Published December 3, 2018

If you are in the midst of your business search, then a major step in the process to buy a business is coming your way – due diligence.

 

This step in the business buying process occurs once an offer from a buyer is accepted by a seller. The business is pulled from the market and placed in a sort of limbo so the buyer has a chance to review all business related documentation and then make a final decision about whether or not they wish to buy the business and how much they would ultimately like to offer.

 

This limbo phase is great for buyers because it essentially stops the access of other potential buyers to the business they want and gives them a chance to peek behind the scenes.

 

Due diligence is not, however, an indefinite period that can drag on forever. A typical due diligence period is two weeks. That’s it, and honestly that’s all you really need. We regularly get requests for due diligence periods of multiple weeks or months – but that extended amount of time is unnecessary and unfair to the business itself.

 

Why is an extended due diligence period unnecessary? If you’ve made an offer on a business, you’ve already seen a good deal of the financial information and have a decent understanding of the inner workings of the business – like the contractual agreements the business has with major clients (for example). You don’t start the due diligence process with a blank slate, it is instead a more in-depth look at something you are already familiar with.

 

Since you aren’t starting from scratch, you should use your due diligence time efficiently. You should review the documentation as soon as you get it, thereby giving yourself a few days to think about your upcoming decisions. You should also have your broker or your business transaction accountant help you if you have questions – but you need to get them any questions and any documentation promptly as they may not be able to get to it right away. Don’t wait until two days before due diligence is over to rush the paperwork to an accountant and then try to request an extension. Procrastinating during due diligence could mean you are rushed into a decision without having reviewed the information thoroughly – leading to unnecessary surprises down the road.

 

Why is an extended due diligence period unfair to the business? An extended due diligence period pulls a business off the market and shifts a seller’s focus to just one buyer. The seller has to take time away from the day-to-day operations of the business to provide requested information and answer buyer questions. At the end of an extended due diligence a buyer can then decide they don’t want to move forward with the business sale, leaving the seller to start over with the process of finding buyers after an extended absence from the market. To shift focus for a period of two or three weeks isn’t unfair – but to ask a business owner to change their focus for weeks or months is.

 

If you are in the market to buy a business, it is in your best interest to use the due diligence period to your advantage by working quickly with the information you are given and giving yourself the time to think about the decisions you need to make. It will alleviate some of the stress of the business buying process and allow you discover any surprises before they become a problem down the road.

 

Are you looking at businesses and are concerned that a two week due diligence period won’t be enough? Do you have more questions about what happens during due diligence? Ask us! Please 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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They Google You Too – Advice For Business Buyers

Posted in Become a Business Owner, Buyers Articles

Published November 19, 2018

If you are in the market to buy a business, then what is one of the first things you will likely do when you find out the name and location of a prospective business? Hit a major search engine like Google and plug in the name.

 

What many buyers fail to realize, however, is once a seller finds out your name they will do exactly the same thing.

 

Buying a business is not at all like buying a car. When you are shopping for businesses, you are essentially shopping for a job – so just like a prospective interviewer would do, business sellers are going to look you up.

 

You also have to consider that the business you buy is someone’s baby, a business where they have invested countless hours and a great deal of money. For most sellers, there is an emotional connection to their business, and as such they won’t be willing to hand over the reins to just anyone. The legacy of their business can be just as important as the check you write.

 

In addition to the emotional connection, in business sales there is typically a training period of several weeks – so major personality differences between buyer and seller can cause a whole host of problems.

 

Another major factor that will cause a seller to look you up? Seller financing. In most small business transactions, the seller finances part of the deal. Since they are keeping some skin in the game, it will be very important to know who you (as a buyer) are and if you are the kind of person who will be responsible enough to pay back the debt.

 

If you are in the market to buy a business, ask yourself this. What happens when someone Googles your name? If you haven’t ever checked, you should.  

 

Your online presence will speak volumes to a seller who has never met you, and in some cases, brokers themselves will even Google you before agreeing to work with you.

 

What should you do if you are in the market to buy a business? The first thing you should do is set any social media you use for personal use to private. Only those people you know should be able to see things from your personal life, not prospective sellers.

 

You should set up a professional social media account on a site such as LinkedIn or a more professional Facebook page that sellers and brokers can see. You should also abide by basic social media guidelines that anyone would use if they were going into a job interview. No pictures of drunken debauchery, no rage-infused political rants, no dirty jokes – you get the idea.

 

If a cursory search for your name turns up nothing but pictures of you partying hard – it may reflect poorly on you as a competent professional and leave sellers uncomfortable with your ability to get the job done. Clean up your social media image before anyone looks you up.

 

Are you a buyer looking at businesses and hadn’t considered your online image? Would you like to know what else you could do to make yourself more appealing to sellers? Please feel free to leave any questions or comments here, and we would be happy to help.

 

 

 

Michael Monnot

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

www.InfinityBusinessBrokers.com

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Buying A Business? 3 Ways To Find A Great Broker

Posted in Business Broker Why & How, Buyers Articles

Published October 29, 2018

If you are considering buying a business, then you’ve probably started looking for a business broker to help you. If you haven’t, you should, as the business transaction process can be dauntingly complex and rarely makes it to a successful closing without some qualified help.

 

If you are broker shopping, you will quickly discover that there are a lot of options.

 

How do you choose the right professional to help you?

 

First, avoid any “part time” brokers. Many, many business professionals like real estate agents, attorneys, accountants – we’ve even come across doctors – “moonlight” as business brokers. Their attempts in our industry are on a part time “dabbling” basis, and as such they rarely know what they are doing. You wouldn’t come to a business broker if someone was threatening you with a lawsuit, so why would you use an attorney to navigate a business deal? Look for business brokers who are only that – full time brokers.

 

Secondly, you want to avoid business brokers who have “proprietary methods”. Some brokers use their so-called proprietary methods as a selling point, but from an industry standpoint there really isn’t anything about what a broker does that could ever really be proprietary. Any broker who gives you the “I am the only one with the special sauce” routine is trying too hard to impress you instead of focusing on what’s important – finding you the right business.

 

Third, you want to avoid business brokers who spend a small fortune on advertising. Brokers who are spending money on multiple television ads, massive full-color mailers and dozens of radio spots are again spending too much of their time focusing on the wrong aspect of their business.

 

What should you use to find a great broker? Referrals. If you find a business broker who gets the vast majority of their business from referrals, then you’ll be in good hands. Referrals come from past buyers, sellers, other industry professionals like attorneys and accountants – and these referrals amount to a great review of that broker’s previous work. Those past clients and professionals trust this broker enough to send the people they know their way. If you are talking to a broker, ask them how much of their business is referral based. A broker with a ton of referrals will be someone who can get the job done and find you a great business.

 

Would you like to know more about how to decide on a business broker? Would you like to know about our referral rate here at IBB? Ask us! Please feel free to leave any questions or comments here and we would be happy to help.

 

 

 

Michael Monnot

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

www.InfinityBusinessBrokers.com

 

 

 

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BEFORE You Get On The Plane – A Successful Business Buyer Trip

Posted in Become a Business Owner, Buyers Articles

Published October 22, 2018

 

The rapid approach of another holiday season and the end of the year can cause a budding entrepreneur to rethink their current life and consider other options. New buyers come to the market curious about what life might be like as the owner of a business, and many who are visiting from northern climates experience the beautiful winter weather of Florida and seriously consider a move south.

 

There are amazing business ownership opportunities in the Sunshine State, and we would love to help you find the one that is right for you – but there is one very important element of the business buying process that buyers should know long before they set foot on a plane.

 

You absolutely, positively can’t call about a business one day and see it the next.

 

This one is frustrating for both business brokers and buyers alike. If you call us today and tell us you are only in town for another 24 hours and you want to see one of our businesses – the answer is no.

 

We would love to accommodate you, but it just isn’t possible, especially during this time of year.

 

In order to see a business, we would have to know that the business is right for you and that it is a business you could successfully afford. There is no sense in wasting your time looking at businesses you couldn’t or wouldn’t want to buy. Then you would have to sign the appropriate non-disclosure agreements. Then a showing would need to be coordinated between your schedule, the schedule of your broker, the schedule of the seller’s broker, the schedules of the sellers themselves and at a time when the business isn’t operating or when the employees will not be around (for confidentiality reasons).

 

This complicated mix of conversations, paperwork and meshing of schedules is going to be extremely tough during the holiday months in particular because many of the necessary parties are traveling or hosting family and won’t be available.  

 

It is possible, however, for all of the necessary background, non-disclosure agreements and schedule juggling to be done – with enough notice. Just realize that 24 hours or even a few days aren’t going to be enough.

 

If you are considering taking a trip south and looking at businesses, make contact with a broker and work on setting up these visits before you even buy your plane tickets.

 

We say this because we want your business search to be successful and we want you to find and see businesses that are right for you. The right business for you is going to depend on things we can’t know about you until we’ve had a chance to talk to you about your goals for business ownership and the amount of money you actually have available to buy a business. The right business for you will also be found by looking at many listings, reviewing financial statements and having conference calls with multiple sellers – all long before you set foot in an actual, physical business.

 

We also want you to be able to make the most out of your time here – so by researching and vetting the businesses that meet with your goals, by already talking to sellers via conference call – you can efficiently see the two or three businesses you are already serious about buying when you come for a visit.

 

Set yourself up for business buying success by starting your search before you buy your tickets to Florida!

 

Are you a buyer who has tried to see a business last-minute and would like to know more about why this isn’t possible? Are you curious about the business ownership opportunities available in Florida? Ask us! Leave any questions or comments here, and we would be happy to help you on your journey to business ownership.

 

 

 

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? Focus On Cash Flow, Not Assets

Posted in Become a Business Owner, Buyers Articles

Published October 1, 2018

What should you care about, assets or cash flow?

 

When you begin the search for a business to buy, your initial tendency might be to think about buying a business in the same way you would buy a house. Buying a home or buying property means you are exchanging money for something physical – a structure or a piece of land.

 

Many new business buyers apply this same logic to the purchase of a business, focusing on the assets or inventory of the businesses they find interesting.

 

If you are buying a house, the finishes and included appliances absolutely factor into the price, but using the perceived value of the comparable physical assets found in a business (like a kitchen hood or vehicles) to judge a listing price won’t work.

 

 

Why? When you buy a business, you are buying cash flow. You are buying an income stream that is generated through the use of the assets – but the truth is most small businesses don’t have many assets to speak of. Most of the time, the physical location of a business isn’t owned by the business owner – a commercial lease is in place. In some cases, the equipment that has been installed (like the hood system in a restaurant) belongs to the landlord as well.

 

We will use the restaurant example to further illustrate this point. When you buy a restaurant, the expectation is that all of the equipment is in working condition, like the grill in the kitchen. You are buying the cash flow that is generated by the use of the working grill. The grill is critical to generating that cash flow, but outside the confines of the business the grill has no value on its own to a business buyer.

 

There are a few instances where the physical assets, like a grill, will play into price. As we just mentioned, the expectation is that everything is in working condition. Excessive equipment, not enough equipment or equipment that isn’t in decent working order can decrease the amount you as a buyer offer on a business – as in each of these scenarios you will have to make changes in order to get the business in proper working order when you take over.

 

It is important to note, however, that not liking the aesthetics of the equipment doesn’t mean you can discount it. If you are looking at a house with granite counter tops and you only like quartz counter tops – this aesthetic difference doesn’t mean you can take $10,000 off of your offer. The same holds true in business transactions. If the business has the necessary working equipment, then it has the necessary equipment- ugly or not. Your offer and consideration of each business should be based on cash flow, not assets.

 

Do you have more questions about how to evaluate the listing price of a business? Would you like to know more about how to use cash flow and multiples? 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

www.InfinityBusinessBrokers.com

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Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

9040 Town Center Parkway
Lakewood Ranch, FL 34202



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