what should i know about selling my business Archives - Page 4 of 16

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

Yearly, Not Monthly: Understanding The Fluctuations Of A Seasonal Business

Published September 5, 2022

Southwest Florida (and all of Florida for that matter) is a very seasonal place. Starting in October our population swells with retirees and vacationers from northern climates where the weather has just turned cold. This is great news for our local economy as businesses are packed, wait times at restaurants climb exponentially – so profits rise. It stays this way until the spring when the weather improves for the northern latitudes. Then local businesses feel the pinch of the approach of the off-season summer. The tourists and retirees are gone, so the year-round locals are all that’s left.

This seasonal rise and fall in business happens in many places, so if you are trying to buy or sell a business, you will need to understand what this seasonality means in terms of a business deal.

Buyers

You will have to realize that the numbers during a peak month are not the numbers for every month, and likewise the months on the low end of the profit spectrum shouldn’t necessarily scare you away. Buyers who are coming to a seasonal area from an area without such fluctuation need to look at the numbers on a yearly basis instead of on a month-to-month basis. If every year the business is slow in July and August, but then rebounds and does well for the remainder of the year, then the business is probably in good shape.

Sellers

Most sellers want to sell their business in the slow months, just after the busy season has ended – thereby taking the lion’s share of the yearly profits when they go. Although this is a smart move financially, most buyers won’t agree to take the wheel with a handful of bad months directly in their path. As a seller, you will need to be realistic about a closing date and be willing to negotiate with a buyer so that both parties end up happy. This is especially true if you will be offering seller financing, as you won’t get paid if the business folds in the first few months after the ownership transition. You will likely need to give up a few lucrative months so the new owner will have enough cash flow to keep the doors open.

The message here is you will need to consider the cycles of businesses in a seasonal area before misinterpreting numbers or trying to set closing dates that will benefit you alone. By allowing some room for negotiation both sides can end up with a fair deal.

Do you have a seasonal business that seems to scare away buyers when they look at the slow months? Are you looking at businesses in a seasonal area and want to know what is acceptable in terms of fluctuation? Please feel free to leave us a comment or question, and we would be happy to help.

Michael Monnot

What Do We Do About The Employees? Suggestions For Business Buyers & Sellers

Published August 18, 2022

A business is for sale, and this business has employees. The employees have been kept in the dark about the for-sale status in order to protect the integrity of the business throughout the transaction process, but now that a buyer and seller have come to an initial agreement and the sale is moving forward – how do you handle the employees?

This is one of the most important (and by nature carefully handled) aspects of the sale of a business. The sale of any business that has employees (especially a business with critical “key employees”) will need to be handled delicately.

As a buyer, do you demand that you meet with employees before closing as you feel they are critical to the business? As a seller, do you let this happen? What if the buyer walks away or approaches the employees the wrong way?

Although a seller might feel that their employees will only be loyal to their ownership and won’t accept a new boss, in most cases employees can view a new owner as a positive – if the transition is handled properly.

How? Focus your discussions with employees on the benefits a new owner will bring – and wait to tell them until after the sale.

Here’s a few thoughts:

Long term businesses often become stale as sales efforts and marketing may have lagged or become non-existent leaving the business just gliding. A new owner can bring that new energy, marketing ideas, additional employees, new clients and just a new way of doing things which can invigorate a business and push it to the next level. As the business grows and changes for the better those employees who stay can reap the benefits of those changes. This is especially true if the business is being acquired by a larger firm or if the business is ripe for expansion.

One of the reasons why you don’t tell employees too early is most of the time the employees really do want or need to keep their job. Telling employees too soon can make them feel very insecure and can leave them wondering if they will have a job after the sale closes. They might worry that they will be replaced, they might have concerns about getting along with a new owner or they may worry that they won’t be able to handle the changes a new owner will make. These worries can cause an employee to panic and quit – which is bad news for both sides of the deal. This is why both sides should wait until after the sale to tell the employees. Knowing that they’ve made it past the end of the transaction will assure an employee that their job is safe. Buyers should let their new staff know that no major changes are planned and immediately set expectations.

The message here is typically the loyalty of employees is to the business or their job and not necessarily to the seller. It’s also critically important to wait until after the sale to tell employees anything.

Instead (after the sale), both sides should focus on open and honest communication, ask for input about what the business can do better, be clear on new roles and reinforce that the new owner is counting on the existing staff. Hopefully that will build confidence and loyalty on both sides, thereby creating a positive environment as the business moves forward to the future.

Have you sold a business and told your employees too early about the sale? Are you buying a business and want to know more about why it’s a bad idea to talk to the key employees before closing? Please feel free to share your story or ask questions here.

Michael Monnot

A Big Question: How To Answer “Why Are You Selling?”

Posted in Sellers Articles

Published August 11, 2022

Business sellers are typically ready for questions from buyers, but they sometimes don’t realize the importance of their answers in terms of the successful sale of their business. How you answer pivotal questions can greatly impact the price a buyer is willing to pay (or even affect whether a deal happens at all).

The biggest of these pivotal questions from buyers is also typically the first. They are going to ask you why you are selling – and you need to have a good answer.

Say you are a business owner who has been in the game for a long time. You built your business over the last few decades into what it is today. You may be approaching retirement age and looking forward to slowing down a bit from the hardy day-to-day experience of being an entrepreneur.

You may want to retire. Perhaps you need to focus on a health issue for yourself or a family member. Maybe you are just burned out and ready to spend every day on the golf course. Most of your reasons focus on the fact that you need to be finished in the entrepreneurial world. The reasons you are leaving your business have nothing to do with the health or future of the business itself – so you need to covey that to any prospective buyers.

So how should you answer the “why are you selling?” question?

Let’s answer this question by first telling you shouldn’t answer this question. If you are burned out and ready to retire, you shouldn’t let a buyer know. Telling a buyer you are tired of your business and hate going to work can give the impression that you have let things slide because you just don’t care about the business anymore. Instead, you should tell buyers that you are ready for retirement, but that you will miss owning your business.

What if you aren’t a retirement seller?

If you are a young and investment-driven entrepreneur, building a business with the intention of selling it may be your focus. Here’s the caveat. Be careful not to answer the question “why are you selling?” in a way that would make a buyer think you are trying to sell your business at its peak.

Instead, put the emphasis on your excitement for your next business venture. Showing that you will continue to be a motivated entrepreneur in the near future will tell a buyer that you are a motivated entrepreneur in your current business venture. You can also talk about ideas for growth within the business that you haven’t had the time or resources to put in place yet.

Whatever your reason for selling, you need to show that you have what it takes to stay in the game – you’re just ready for a new chapter of life that doesn’t include your current business. Answering the “why are you selling?” question carefully will help instill confidence in buyers that your business has room to grow and a great future ahead.

Are you ready to sell, but you want to make sure you answer this and other big questions in the best way? Have you chased away a buyer in the past by answering this question in a way that created concerns? Please share your experiences here or ask us any questions and we would be happy to help.

Michael Monnot

Why You MUST Have A Great Website: Thoughts For Business Buyers & Sellers

Published July 11, 2022

We spend a lot of time getting to know businesses inside and out – and for the most part entrepreneurs (both those who are selling and those who have just purchased a new business) are really smart people. They care about marketing their business in such a way that the business is put in the best light possible. The décor is nice, their local advertising is top-notch, etc. Then you look at their website…

This is a digital age, and like it or not, many future customers will come to you (or won’t come to you) based solely on your presence on the web. The first thing a prospective client is going to do when they learn your name or search for a service in your industry is hit an internet search engine. Your website is the face of your business, even more so than your actual physical location, so your web presence needs to be great. Really, really great.

We come across businesses with alarming regularity who have dreadful websites or no websites at all. This is a HUGE mistake.

But I’m not in IT and I don’t know how to write code! Having a website built is expensive!

Neither of these issues should prevent a business from having a nice-looking and informative website. Long gone are the days when you had to know how to write code. There are a plethora of services out there that will help you build a great website – and most of them are free or very affordable. Think drag and drop template services like Squarespace or Wix.

But I’m not creative! I don’t know what to put on a website!

Again, issues that are easily solved. Almost all of the services that will supply you with a free or low-cost website come equipped with templates – all you have to do is pick one, then copy and paste your information in. You should look up your competition and similar businesses in other areas to see what you are up against. Some templates are too simple or look to hokey, and by spending a few minutes researching you will quickly see what is appealing and what isn’t and then apply what you find to your own site.

A note here, have someone proofread your site before you publish it! There are a ton of websites out there that would otherwise be great except they have major spelling or grammatical mistakes. Mistakes like this show a lack of attention to detail and a lack of professionalism. Is that the impression you want to give to prospective clients? Hopefully not.

Another note: make sure you edit the mobile version of your site as well. Most people are looking things up on their phones – and a layout that looks good on a computer screen doesn’t necessarily translate well to a mobile site.

If you are trying to sell your business and don’t already have a great website in place – changing this needs to be a priority. Buyers will absolutely look you up on the web while they are considering buying, so put your business in the best light possible by improving your internet presence.

If you are buying a business with a terrible website or no website at all, creating a great online presence can be a quick and easy change you can implement immediately. This will help to bring in new business by allowing customers to find you online, and can let those customers know what kinds of goods or services you offer.

A professional-looking, visually appealing and informative website can be your very best marketing tool. Don’t sell your business short by ignoring how you are perceived online!

Are you a business seller who needs some advice about improving your web presence? Are you a business buyer who would like to know what to look for when you are looking at the websites of prospective businesses? Ask us! Please leave us a comment or question here, and we will be happy to answer any web presence questions you have.

Michael Monnot

Should I Use Multiples? Advice For Business Sellers & Buyers

Published July 4, 2022

The most important number in the sale of any small business is the price. The listing price is what a seller hopes to get and the purchase price is what someone is actually willing to pay.

Where do these numbers come from?

There are a few ways that business prices come to be. They typically come from an analysis of the financial records of the business, coupled with what the assets and inventory are worth. In some cases, it is appropriate to use the sold price of comparable businesses in the area, in others it comes down to multiples:

What’s a multiple?

In the simplest form a multiple takes the average sale price for businesses in a particular industry and compares that number to what a business earns. For example, the multiple for a restaurant might be two times earnings – meaning you should price a restaurant at twice what it earns in a particular year.

Now that you know what multiples are, how should you use them?

Multiples should really only be used to determine a ball-park figure for the value of a business. Take the restaurant example. Restaurants are very complex businesses, so most restaurants sell for a number very different than an oversimplified two times earnings.

If multiples only give you a ball-park figure, should you use them at all? Yes and no. When you are looking to sell your business, multiples can help you get a starting point for where you might want to set your listing price. It is critically important, however, that you not stick with a simplified number that could cause you to over or under value your business on the market.

If you are a buyer, you can use multiples to help you gauge if the listing price of a business is in line with industry standards – just remember that the justification for a listing price probably includes much, much more than just the multiple.

Are you a business seller who wants help using multiples to set a listing price for your business? Are you a buyer who has questions about how to use multiples when analyzing business prices? Ask us! Please feel free to leave us a comment or question here, and we will be happy to help you with multiples.

Michael Monnot

Should I Offer Seller Financing? Thoughts For Business Owners

Posted in Sellers Articles

Published June 30, 2022

Are you considering selling your business? In a perfect world every buyer would come to the table with an all-cash full price offer, but in reality we know that’s not going to be the case.

Many small business buyers will qualify for loans like those from the SBA (Small Business Administration), but a far more common practice is seller financing.

Seller financing means a buyer pays a substantial down payment (typically more than half of the purchase price) and then you finance the rest for a specified interest rate and amount of time. If the buyer falters for some reason you get to keep your money and you get your business back.

Seller financing happens in a lot of small business transactions because it can be a very successful way to get a business deal done. From a buyer’s perspective it means the current owner is willing to keep some skin in the game – they know the business is in good shape and has a future (so they can get paid). It also means that a buyer will have the option to buy businesses that would otherwise be unaffordable. From a seller’s perspective seller financing acts as a marketing tool because, as previously mentioned, it means you are willing to bet on the future of the business. It also increases the pool of buyers who can now consider buying your business.

Is it always a good idea to offer seller financing? It depends. If you are someone who just wants out and has no desire to have any attachment to your business after the sale, then maybe seller financing isn’t for you. If you are in a very hot industry that is currently attracting cash buyers then you might get away with not having a seller financing conversation at all. Even if you don’t love the idea of seller financing it’s typically a good idea overall to leave all financing options open when you list your business. You don’t want to miss out on a great buyer and a great return because you decided too soon to refuse a more creative financing deal. Keep that door open!

Have you decided to sell your business but hadn’t yet considered offering seller financing? Did you buy your business using seller financing and have an experience to share? Please feel free to leave us questions or comments.

Michael Monnot

Keeping Your Cool: Advice For Business Sellers

Posted in Sellers Articles

Published June 23, 2022

We get it. Your business is your baby. Your blood, sweat and tears. When you are preparing to separate yourself from your business after a sale, it can be fairly difficult to remain objective. After all, this business has been your life for a long time. The level of emotions you encounter might surprise you. Add to that the need to work through a deal with a buyer who, in most cases, is a complete stranger.

Anyone who is selling their business hopes to find a buyer they like. Negotiating with someone whose personality meshes well with yours is far easier than with someone you generally dislike.

The reality is you might not like the person buying your business. The good news is you don’t have to like them – you just have to get through the deal. The key is to remain calm, cool and collected.

It can take anywhere from 9 to 12 months (sometimes longer for niche businesses) to get your business from listing to closing. Even if you have a buyer it can take many months to get a deal all the way through. That time span can feel like an eternity if you’re working with someone you dislike.

Do your best to maintain your composure and maintain a level of professionalism in interactions with your buyer (whether you like them or not). This will make the transaction process far easier than if you let a clash of personalities devolve into a miserable time for everyone. Deals fall apart every day that didn’t have to because people let their feelings get hurt. Business transactions are just business – so reminding yourself of that regularly will help.

What if I totally hate the buyer?

You don’t have to sell someone your business, but their money is as good as anyone else’s. There’s also no way to know how long it will take you to find another buyer. Instead of walking away, do what you need to do to keep your distance from your buyer if it turns out that you’re not going to get along. Use your business broker for any and all communication between you.

Another thing to consider? In most business transactions there will be a 2-week training after closing. This training will be part of the purchase contract and ensures that the new buyer has the chance to learn everything they need to now in order to operate the business going forward. If you’re not a big fan of your buyer this 2 weeks can seem torturous – but you have to remember that at the end of the day the goal was to sell your business and get a financial return. If all that it’s going to take to reach your goal is 2 weeks – you can do it.

Are you thinking about selling your business and are worried about finding a buyer you can work with? Do you have an experience with a buyer you’d like to share? Would you like to know more about the training period after closing? Leave any questions or comments, we would be happy to help.

Michael Monnot

Buying Or Selling A Small Business? How Automation Can Help

Published May 16, 2022

Business ownership isn’t always fun. Think of a repetitive, mundane administrative task that a business requires. As an owner you make time for it and do it because you have to, but that time could absolutely be spent accomplishing something else more productive – like growing your business.

When you think of automation, you probably think about huge corporations who automate manufacturing or delivery routes – but small businesses can benefit from automation too. Many entrepreneurs are either unaware of or discount the potential benefits automation can bring to their business lives.

Ok, what can a small business automate?

Your marketing strategy:

Marketing is the lifeblood of your business – it’s what brings new customers in through the door. Your email marketing and social media exposure are incredibly important – and can absolutely be automated. There are a myriad of companies that can creatively automate your email marketing to ensure you stay active in a customer’s inbox, and there are are also services available that can help manage and schedule your social media posts so you don’t have to.

Your accounting:

Keeping track of invoices, managing your financial records and tracking expenses can be very time consuming – but with accounting software you can automate many aspects of your business accounting. Once you have systems set up and in place your new transactions can be easily categorized, filed and paid.

Your paperwork:

Long gone are the days of physical signatures and fax machines – now most of the paperwork, sales documents and contracts you need can be sent and signed electronically in seconds. Copies are immediately sent to all parties involved, taking another task off your plate.

Your payroll:

If your business is big enough to have employees but small enough that a full-time payroll person isn’t in the cards – there are many services that can take the payroll pressure off of your plate. Set it up and it can run on its own.

A caveat here. There are many, many services/companies/software options out there. It is incredibly important that you do your homework when selecting an automated service to ensure that the time it saves you will be worth it.

Ok, I’ll look into automation – but how can automation help business owners and business buyers?

Business owners:

Another major bonus to automating some of the administrative tasks within your business? When the time comes to sell, buyers will see that you’ve taken the “work smarter, not harder” approach when it comes to your business. This will speak volumes about how you see a business owner’s time as valuable and about how you have placed a priority on streamlining the business to make it successful.

Business buyers:

As you look at how prospective businesses are run and how the current owner spends their time, think “how can I automate this so I can turn the time I would have spent on this task into growth for my new business?” By thinking about the aspects of the business you can automate, you will be better prepared to see the potential of a new business opportunity instead of just what’s currently there.

If you’ve never considered how automation could help your current or future small business, now is as good a time as any to start. Thoroughly research your options – then decide what could help you take some of the drudgery of business ownership off your plate.

Do you own a business and would like to know more about how streamlining your business may impress buyers? Are you considering buying a business and want to know what types of automation would best suit the industries you are interested in? Please feel free to leave any questions or comments and we would be happy to help.

Michael Monnot

Why Sellers Need To Work On Confidentiality Too

Posted in Sellers Articles

Published April 18, 2022

If you are selling your business you probably know how damaging it can be if your staff, customers or frankly anyone finds out that the business is on the market.

Employees can panic and quit en masse, taking their regulars with them. Customers can stop coming in, worried about how much the business might change under new ownership. The community at large might think you’re selling to get yourself clear of a sinking ship (as the misconception that a business for sale is a business on the brink is both pervasive and in the vast majority of cases – false).

While your business is for sale maintaining confidentiality is paramount, but not just in terms of the for-sale status. There are parts of your business that a buyer will need to see – your tax returns, your employee records, your vendor contracts, your client contracts and the like that are also critically important. Your business records and proprietary information need to stay confidential too.

That’s why it’s a good idea to hire the right help – a business broker. Business brokers are able to safely and confidentially market your business to buyers, at first through a purposefully vague listing and then only disclosing any identifying information after a prospective buyer has signed the appropriate non-disclosure agreement (NDA). The NDA also protects the records and information a buyer will have access to from disclosure so you don’t need to worry about confidential information ending up in the wrong hands.

While your business broker and buyers who have signed the NDA do their part to keep the confidentiality of your business transaction in place, you as a seller also need to be careful so you don’t burst your own confidentiality bubble. It happens more than it should, and often it’s the product of an seemingly innocent conversation.

Here’s an example. A business seller flies to see their parents on vacation, and while on the plane headed out of state they strike up a conversation with the person sitting next to them. The conversation turns, as it often does, to what you do for a living. The seller tells this stranger that he owns a waterfront restaurant that he’s currently selling. Later in the conversation he lets slip that this restaurant is in a specific community, one where there’s only one waterfront restaurant. Unbeknownst to the seller, this casual stranger not only lives in this community, they’re very involved in the community’s social scene and have many friends who frequent his restaurant. As soon as the plane lands, the gossip begins, as phone calls to friends include “did you hear the restaurant is for sale?” By the time the seller is on his return flight the damage is done and the entire community knows about his for-sale status.

The point here is you wouldn’t carry around a copy of your business tax returns to show every stranger you meet, so you need to work just as hard as your broker and the buyers who sign the NDA to keep your for-sale status under wraps. Don’t tell strangers, don’t tell your friends, don’t tell your neighbors – you get the idea.

Are you considering selling your business and hadn’t thought about how important confidentiality is? Would you like to know more about how we market your business while maintaining confidentiality? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot