what should i know about selling my business Archives - Page 3 of 16

Why You Might Be The Reason Your Deal Falls Apart (And How To Keep It From Happening)

Published March 13, 2023

A deal falling apart is the worst, particularly when it happens as you approach the closing table. Deals don’t close for a myriad of reasons, but to prevent it from happening in yours it might help to know what the market currently shows in terms of the reasons why deals fail. The IBBA and M&A Source Market Pulse Survey from the last half of 2022 offers some insight into why deals collapse.

The report shows that for Main Street businesses ($2MM or less) the main reason deals don’t close is poor financials – which doesn’t just mean that your business accounting system consists of a box of crumpled receipts under your desk. It also means you may have misrepresented, not fully understood or embellished your numbers. Misrepresenting your numbers, whether intentional or not, is a bad look and can lead a buyer to mistrust you to the point that they no longer want to continue with the deal.

Across both Main Street and Lower Middle Market ($2MM to $50MM) the overall reason deals don’t close is an unrealistic seller value expectation. You may have a magic number in your head, you may have a figure you’d love to get for your business that is based on what you’ve invested over the years, you may have a written valuation from a professional that specializes in your industry – but in the reality of the business-for-sale market all of those numbers essentially mean nothing. Your business is actually worth what a buyer actually pays you for it.

Another major factor in the death of deals is time. The longer you make a buyer wait, the longer your business is listed, the longer the transaction takes to work it’s way through the process the more likely it is to die. People change their minds, the market fluctuates, life circumstances get in the way. The way to combat time as a killer is to be ready. Have your financials in order, prep (with your business broker’s help) the answers to commonly asked buyer questions and be proactive with buyer requests – handling them the moment they come in.

If you’re a business buyer, know going in that some really great businesses have records that are lackluster (in terms of organization) at best. Also understand that it can be incredibly difficult for a seller to put a number on all their years of hard work and investment. Be patient with your negotiations and ready to possibly dig through a box of receipts.

The moral of this story is although some reasons your deal might fall apart are out of your hands – most reasons are absolutely within your control. Go in ready, with realistic expectations and you’ll have a far better chance of seeing that closing table.

Do you have a Main Street business to sell and want to know what businesses like yours have recently sold for? Would you like to know how to get your financials ready for buyer’s eyes? Do you have questions about how to negotiate with a seller who has their business listed for an unrealistic price? Ask us! Please leave any questions or comments and we would be happy to help.

Michael Monnot

What’s In A Closing? An Explanation For Buyers + Sellers

Published March 6, 2023

When you start the process to buy or sell a business (especially if it’s your first time doing so) you will likely encounter some new lingo that you may or may not be familiar with. For instance, the process of buying and selling a business is referred to as a transaction, the professionals who help guide you through the process are known as business brokers and the end of the transaction is called a closing.

What is a closing exactly?

Put simply, a closing is the goal of every business-for-sale deal. It is the end point of the transaction and occurs when all parties included have signed all necessary documents, when the money has changed hands and the keys to the business are given to the new owner.

In many circumstances, this will all occur at one meeting, sometimes referred to as the closing table. All parties will arrive ready to sign and exchange the necessary funds and keys. The business brokers and business transaction attorneys will be present, and typically the funds for the sale will be in the hands of an escrow agent who will release them once the appropriate papers are signed.

In other transactions, the escrow agent acts as a kind of intermediary for the closing. Each party will receive and sign the necessary documents and then send them to the escrow agent. Once the agent has received everything needed for the closing from both parties, the funds in escrow will be released to the seller and the deal will then be officially closed.

Another aspect of the closing process usually involves a walk-through of the business and an inventory count. This is important because if equipment or inventory has changed, the selling price of the business may need to be adjusted.

The closing type and necessity of a walk-through will depend on the deal that has been reached and the preference of the parties involved. Ask your business broker about which type of closing you will likely see at the end of your specific transaction.

Are you a business buyer or seller with questions about the closing process? Would you like to know more about walk-throughs or inventory counts? Ask us! Please leave us a comment or question here and we will happily get those questions answered.

Michael Monnot

When Your Parent’s Path Isn’t Your Path – An Important Conversation For Entrepreneurial Kids

Published February 27, 2023

Sometimes parents will buy or start a business because they hope to leave their children a legacy; the legacy of multi-generational business ownership. What happens if the children of those parents dread the idea of having to take over their parents’ business? The time for that difficult conversation is always NOW. If you are the child of business owners, ask yourself these questions:

Did you grow up working in the family business, but always dreamed of doing something else?

Would you only take over the family business out of a sense of duty or guilt and not because you really want to?

Have you had this conversation with your folks?

If any of these questions resonate with you, then perhaps it is time for you (and your family) to take a good look at what the future of you, your family, and the business hold.

Some things to consider?

If you would only take over the family business because you feel like you are bound by a sense of duty, then that decision would probably be a mistake. Businesses are a life-encompassing affair, and as the owner your heart really needs to be invested in the success of the business if it is going to continue to succeed the way it did when your folks were running the place. We frequently see small businesses falter when the second (or third) generation takes over without the same amount of drive.

If you have passion in another industry, then instead of sacrificing your goals to step into the family business role the family tradition of entrepreneurship can continue by selling your parent’s business when they are ready to retire, and then take the proceeds to invest in a business venture where you will have the passion and drive to continue the family legacy.

These considerations are important, and the conversation needs to happen sooner rather than later.

If you are the parent in this situation, you need to be honest with your kids about your expectations long before it is time for you to step down as owner. Although you may love your business, your kids might not, and it would be a far more productive legacy for all your hard work if you invested in a business where your children would be willing and able to succeed.

Do you own a family business and are concerned that your kids don’t want to follow the same path? Are you the child of a small business owner who likes the idea of staying within a family of entrepreneurs, just in an industry where you have passion? Talk to us! Leave a comment or question, and we can help you decide what would work best for your family and your legacy.

Michael Monnot

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

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

Published February 6, 2023

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

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

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

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

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

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

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

Michael Monnot

How An Innocent Conversation Can Mean The Destruction Of Your Deal: Buyers, Sellers + Confidentiality

Published January 30, 2023

Confidentiality is a big, big part of business sales.

What is confidentiality? When a business is for sale, the only people who should know that it is on the market are the seller, the business brokers and attorneys involved and qualified buyers who have signed the appropriate non-disclosure agreements. That’s it.

Most people new to the process don’t understand the importance of confidentiality. When you are buying a business, you want to know absolutely everything about the business so you can make an educated decision. When you are selling a business, you want to get the word out there so you can reach the most possible buyers. Confidentiality seems to stand in the way of those two goals, right?

It does, and it doesn’t. Sure, confidentiality makes it a little more difficult to spread the word or gather information, but there is a very big reason why confidentiality needs to be in place. Without it, a business stands to lose – a lot.

What can happen if confidentiality is breached and the for-sale status of a business gets disclosed? We’ve seen an entire staff quit and move to the competition, taking all of their regular customers with them. We’ve seen customers stop frequenting their once-favorite establishments. We’ve seen clients who are under service contracts cancel their contracts in favor of a more stable company. We’ve seen the local competition move in for the kill. Bottom line? It can be a disaster.

I signed the non-disclosure agreements and I’m not going to tell anyone, why is this such a big deal?

Here’s why. Most of the time when a business gets inappropriately disclosed it’s not because someone was shouting from the from the rooftops. A seemingly innocent conversation can derail a deal and hurt a business. Here’s an example:

A client was flying in from out of town to get a first look at a restaurant he was already very interested in buying. He had signed the appropriate non-disclosure agreements and hadn’t told anyone he knew the name of the restaurant or exactly where it was. On the plane, he strikes up a conversation with the woman sitting next to him. She tells him the name of the exclusive gated community where she lives, and he says “Hey! That’s where I’m going too! I’m thinking about buying the restaurant in that community!” She now knows that the restaurant is for sale, so when she gets off the plane a few hours later she casually mentions the conversation to a friend in the same community. “What a small world, right?” Within a few days the entire community knows about the for-sale status of the restaurant, including the restaurant staff who panic and quit en masse. This seemingly innocent conversation between complete strangers caused serious staffing issues and nightmare for both the business seller (who now has to find, hire and train almost an entirely new staff) and the buyer (who now has to take over the business without the experienced employees they were going to depend on).

The most important thing that you can do as both a buyer and a seller is keep the for-sale status of a business to yourself!

Are you a buyer who wants to know more about how you get information on a business without breaching confidentiality? Are you a seller who wants to know how you can keep your business sale a well-guarded secret? Ask us! Please leave a comment or question here, and we will be happy to help.

Michael Monnot

Honesty Vs. Telling You What You Want To Hear – Selling Your Business With A Broker

Posted in Sellers Articles

Published November 3, 2022

If you really tried to add up all the hours you’ve put in, every penny you’ve spent, all the stress you’ve endured – it would probably mean your business is worth an absolutely insane amount of money. It would be great, right?

In reality your business is only worth what someone is willing to pay for it, so pricing your business correctly when you list is extremely important. Price it too low and you’re leaving money on the table. Price it too high and buyers probably won’t attempt to make an offer. You need to be in that sweet spot where you’re price reflects the actual cash flow of the business but isn’t delusional.

How do you figure out the sweet spot for your listing price? Talk to an experienced and qualified business broker. They’ll help you consider cash flow, your equipment and inventory, upcoming contracts, debts the business holds, your commercial lease, what comparable businesses have recently sold for, etc. and guide you to a listing price that gives you your best chance for the highest return on your investment.

Here’s the most important point. If you’ve chosen the right broker their goal is to help you sell your business successfully. The only way that’s going to happen is if the listing price is right. If you’ve got a broker who will let you list for whatever you want – that’s a problem.

Letting a client list their business for whatever they want is a way for some brokers to get listings – listings they know won’t sell. Why would they do this? Any listings they have will generate calls from buyers, so when a buyer inquires about your substantially overpriced listing that broker will use the opportunity to steer your potential buyer to another of their listings they can actually sell. Your business languishes on the market indefinitely and you don’t see the benefit of the listing – the broker does.

How do you keep this form happening to you? Hire a broker who tells you the truth. You might not like what you hear, but a broker who actually wants to sell your business isn’t going to let you list for an astronomical price. They’re going to help you hit that sweet spot – even if it’s less than you would ideally want. A good broker bases their listing prices in reality, not with the goal of getting the listing at any cost.

Ask lots of questions in your initial conversations with brokers. If you’re requesting a specific listing price and they don’t agree, ask why. If they are willing to let you choose any number you want – remember in that scenario you aren’t the one who benefits.

Have you tried to sell your business without any luck and now think it was because you listed it for the wrong price? Do you want to know what businesses like yours have recently sold for? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

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

Posted in Sellers Articles

Published October 27, 2022

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

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

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

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

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

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

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

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

Michael Monnot

Why You Should Keep Politics Out Of Your Business Transaction

Published October 24, 2022

This one probably seems pretty obvious. Two people who are essentially strangers are trying to put together a deal for the sale of a small business from one party to another. There are seemingly endless moving parts and points to negotiate, so just getting to a closing table sometimes feels like it takes a herculean effort. All throughout this process everyone needs to try their best to stay objective and keep their cool – but with someone’s blood, sweat and tears being exchanged for someone else’s hard earned money it can be tough to stay emotionless and not be offended.

Then someone starts talking politics.

We all know how divisive political conversations can be. They upend family gatherings and have turned into brawls on the street. Why are we talking about them? A simple political comment can snowball and end a deal.

You don’t have to be madly in love with the person on the other side of your transaction. What you do have to do is get along with that person long enough to put a deal together, close that deal and then go through a training period on the other side. The relationship between a business buyer and a business seller is so delicate intermediaries (business brokers) are needed to keep the deal on track and act as a buffer between the parties involved.

Why then would a person trying to make a deal happen for themselves throw a political grenade on the whole process? Just don’t. It’s a bad idea.

Everyone is entitled to their own political opinions. What you don’t need to do is share those opinions in an already tenuous situation that has big ramifications if the two parties reach a point where they can no longer communicate.

Ok, but what if I’m not the one who is always bringing up politics?

If you really want your deal to happen your best bet is to ignore those comments from the other side. Change the subject, walk away and communicate through your business broker as much as possible.

Are you buying or selling a business and want to know more about how business brokers can act as a buffer in a business transaction? Have you been a part of a business deal that went south because of a political clash and have a story to share? Please leave questions and comments here.

Michael Monnot

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

Published September 12, 2022

If you are buying or selling a business, you will want a great broker by your side, as it will be instrumental in giving you the best chance for success.

How do you know if a broker is good? What should a great broker do? Here are a few of the things we do for our clients that mediocre or bad brokers just don’t do:

A great broker should answer the phone and return emails.

We know, this sounds crazy, but we get lots of clients simply because we were the first business brokers who actually answered the phone, returned their call or answered an email.

A great broker should talk to their clients.

Again, this might sound ludicrous, but we come across folks all the time (especially buyers) who have never had an actual conversation with their broker. Their communication has been limited to a few emails and non-disclosure agreements sent back and forth. We think it is critically important to talk to our clients. If we can talk to you and find out what you really have in mind, then we can save you time and target a search of businesses that fit with your goals. If you are selling, your broker should make themselves available to answer any questions that you have and should also know what your goals are. The only way a broker can really know this very pertinent information is to have a conversation with their clients.

A great broker should not be pushy.

Everyone has had the pushy-salesman experience, and it is never positive. Your broker is there to help you buy or sell your business, but all of the decisions in that process are yours alone. Your broker should never try to force you to make decisions that you are uncomfortable with. Many brokers behave like the quintessential bad used car salesman. They don’t get paid if the deal doesn’t close, so they force the deal at the expense of their clients. We think that’s just bad business. We get many of our new clients from referrals from past clients, and that wouldn’t happen if we didn’t keep our client’s best interest at the forefront of every transaction.

A great broker should follow through.

If a client needs information, needs documentation, wants to schedule a meeting or call – then a broker should follow through and make sure that those things are happening in a timely fashion. Business deals don’t close themselves, so a great broker needs to stay on top of what needs to be done, and needs to keep the deal moving.

If you are considering buying a business or if you are ready to sell the business you currently own, look for these qualities in the broker you work with. The difference between a great broker and a bad broker can mean success or failure for your transaction.

Would you like to know more about what we do for our clients that sets us apart from other brokers in the industry? Ask us! Please leave us a comment or question here, and we would be happy to assist you in any way we can.

Michael Monnot