what you should know Archives - Infinity Business Brokers

How To Balance Confidentiality Versus Marketing Exposure: Thoughts For Sellers

Posted in Business Broker Why & How, Sellers Articles

Published August 1, 2024

Business brokers get a lot of questions from business sellers, and one of the most common topics revolves around how to bring in buyers without letting the world know that the business is for sale.

Why is this an important point? Confidentiality during a business transaction is paramount.

As a seller, you don’t want the competition, your staff, or your vendors to know the business is for sale until the deal is done. A competitor can exploit your status, employees may jump ship, and vendors might tell their other clients about your impending business sale.

Discretion and confidentiality, therefore, are the name of the game when it comes to selling your business.

As a small business owner, however, you may find this counter-intuitive. The way you have brought success to your business is by getting the word out there. You have used networking and marketing strategies to make sure that as many people as possible know about your business and what you can do for them. You have put out campaigns that may have included mailers, signs, posters, emails, and flyers. The more people you reach and the louder your message, the better.

So how do you balance the need to bring in buyers with the need to keep the whole thing under wraps? Don’t go it alone.

Confidentiality during a business transaction is one of the most important responsibilities that a business broker brings to the table. Trying to market your business yourself can lead to disastrous results, as it can be hard to know who to trust and who to disclose your sale status to.

Your business broker will be able to market your business in a variety of ways:

-A good broker has access to business-for-sale databases that are available to other brokers and even to those who are searching online on their own. These listings give a prospective buyer a good idea of your business and the numbers without knowing which business it is. If they are interested in finding out more, they will be required to sign a non-disclosure agreement before they are allowed to know any business or location specific details. You can even specify a list of those (like competitors or employees) who you would like to be kept from finding out your business status.

-Most brokers also have lists of prospective buyers, so when your business gets listed they will let those folks who’ve been looking for a business like yours know that it’s available.

-Business brokers also have contacts within the local business community, and are therefore able to let interested parties know about your business without giving any specific information that would let someone figure out which business is for sale.

-Depending on the type of business you have, certain types of marketing may work better than others. An experienced broker will know which methods will bring in the right buyers and which methods are a waste of time. They will be able to implement a marketing plan for your specific business accordingly.

The message here is the confidentiality of your business sale is of the utmost importance, but so is getting you a buyer and getting your business sold. By employing the services of a qualified and experienced broker you can have the best of both worlds.

Are you a business seller who has had issues with confidentiality? Do you have questions about how we can market your business successfully while keeping the whole transaction under wraps? Ask us! Leave us a comment or question here and we will be happy to help.

Michael Monnot

Why Florida Business Buyers Should Research (Not Freak Out About) Hurricane Risks

Published July 29, 2024

If you’ve considered moving to Florida and buying a business, then the news cycle during the hurricane season might have you considering somewhere more inland. And north. And away from the ocean.

Don’t let it.

Natural disasters happen everywhere – the up side to a hurricane (as opposed to a tornado or raging forest fire) is you get lots of time to prepare. Boarding up windows, sand bagging doors, moving expensive electronics and important papers out of harms way, etc. works to lessen the blow by these large, but infrequent, storms.

Let’s talk about that frequency for a minute. It might seem like hurricanes are a part of everyday Florida life, but the big and bad ones really don’t happen that often in one location. Southwest Florida, where hurricanes Irma and Ian caused havoc, hadn’t seen the impacts of a big storm since 2004 (Charley) – a 13 year break between large storm impacts.

If you want to be in Florida and are worried about the impact of storms remember that the majority of Florida is inland – most business owners can’t see the ocean from their front door. Only those businesses very close to the beaches, bays and rivers need to be extra vigilant and worry about concerns like storm surge – and those businesses can successfully recover if they properly prepare and keep up to date on their insurances. Your location is going to matter a lot if you’re worried about hurricane impacts, so do your research and see what areas you would be most comfortable in – then work with your business broker to find businesses in those areas.

Once you own a Florida business, preparation is the key to success in a storm. Although some business owners can have hard road ahead in the aftermath of a storm (because of the damage they sustain), most businesses who plan ahead are able to reopen relatively quickly. Generators and full spare gas cans mean that some businesses are even able to open their doors before the power comes back on. New construction codes (like hurricane windows and roof tie-downs) that were put in place in the last few decades have also dramatically decreased the amount of damage a storm can do.

The point here is you shouldn’t let hurricane season dissuade you from the chance to be a part of the booming Florida small business economy. In fact, if you’re considering a business in the construction, fencing, tree service or roofing industries – then our occasional bashing by a big storm means more job security for you.

Have you considered buying a business in Florida but are concerned about how hurricanes can affect your business? Do you have questions about what areas are more prone to the effects of a hurricane? Ask us! Please feel free to leave any questions or comments here and we would be happy to help.

Michael Monnot

Why You Need To Think Of The Closing Table As A POSSIBLE Miracle

Posted in Buyers Articles, Sellers Articles

Published July 22, 2024

Business deals are really, really tough. A large amount of money is changing hands. Many people are involved. Schedules are fluid and frequently changing. Personalities clash. Someone is giving up their blood, sweat and tears to a complete stranger. Another person is buying themselves a job from a person they don’t know well enough to completely trust. It’s a tenuous balance to be sure.

When you buy or sell a business you might think you don’t need help, but the truth of the matter is that business deals are so inherently fragile that it can be almost impossible to see a closing table without someone in the middle. That person is a business broker, and you need a good one.

Business brokers work as intermediaries. They are a buffer between everyone involved and are worth their weight in gold. Their job is to protect and guide the transaction from start to finish, and to keep the relationship between the buyer and seller as amiable as possible.

People who own businesses and people who would buy a business are a tough bunch. Entrepreneurship is difficult and it takes someone with a tenacious personality and a lot of drive. Think type-A, organized and decisive. Guess what happens when you put two people with strong personalities in a room together and try to make a bunch of really big decisions? They clash.

Why are we telling you this? If you know going in that there are going to be conflicts, that it’s a completely normal part of the process and that you have your broker to get you through – the conflicts don’t seem as bad and world-ending.

There will be a lot of moments while you buy or sell a business where it will feel like the deal is dead, like you can’t get the details ironed out, like it’s a hopeless uphill battle. The good news is this isn’t true. You can get a deal done if you prepare yourself by having a lot of patience and by getting yourself the right help in the form of an experienced and qualified broker. Your closing table is an absolutely possible miracle.

Are you thinking about buying or selling a business and want to know what you should do when you feel like the deal has no hope of making it to the end? Would you like to know more about how business brokers work through a transaction? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

What Type Of Business Owner Do You Want To Be?

Published July 15, 2024

Someone who wants to buy a business needs to consider many things, like what industry they want to be in and what they can realistically afford. What many prospective business buyers miss, however, is a more basic question.

What type of business owner do you want to be?

Why does this question matter? The answer fundamentally changes your approach to the business buying process, as well as narrows the focus of your search to just those businesses that meet with your ultimate goal.

Let’s look at some of the basic categories of business owners:

Category 1: The Franchisee

If you are looking for a turn-key business where everything from operating procedures to marketing plans is already spelled out, a franchise might be for you. Franchises do require that you follow the instruction of the franchise at large, so you will have less control over things like decor and products/services offered, but they do come with the added benefits of brand recognition, established business practices and an existing franchise will already be built out with a fully trained staff. Franchise businesses are good for someone who wants to be a business owner, but is willing to give up some of the decision making in return for having much of the planning work done by someone else.

Category 2: The Serial Entrepreneur

The serial entrepreneur is very similar to someone who likes to flip houses. You look for a business that may not be in the best financial shape, but has potential for growth – and then build it to a pre-determined level before selling and moving on to the next business opportunity. This type of entrepreneur is someone who gets bored or burned out quickly, but likes to work very hard and doesn’t mind a big challenge.

Category 3: The Long-Term/Family Business Owner

If you are looking to get into business ownership because you want to buy your dream business and potentially pass it on to your children, you would be a long-term business owner. You are looking for a business you will own until you retire or pass on the reins, so an established business that is already a fixture of the community might be right for you. This type of business buyer might also look for a business with potential for growth, but they typically look for a less-risky investment.

Do any of these types of business owners resonate with you? Do you see how different the “right” business would be for each of these types of buyers? Have a conversation with an experienced and qualified business broker about your goals for business ownership, and then the two of you can really narrow the field of potential businesses to those that would help you achieve those goals.

Have you always wanted to buy a business but don’t know what type of business would be right for you? Does one of the types of business owners above sound like you? Would you like to know what businesses are currently available that would work for you? Ask us! Leave any questions or comments and we would be happy to help!

Michael Monnot

Buying A Business? Confidentiality + Why It Matters

Published July 1, 2024

This is a topic we write about a lot, and for good reason. Buying a business is one of the few major purchases people make that requires a level of secrecy. When you buy a house or buy a car, those are done out in the daylight, where all of the relevant and pertinent information about what you’re buying is available – often with just a Google search.

If you’re in the market to buy a business then you may have realized that it is really, really difficult to get information on businesses for sale. Listings are super vague and don’t typically include any pictures that would tell you what business you’re looking at. Calls to the listing broker lead to vague information as well, along with requests to sign a non-disclosure agreement (NDA) – which requires your full name, physical address and your phone number/email. You might also have to provide a financial disclosure in order to find out more than just ancillary information.

You may be thinking “I’m about to spend a ton of money, why do I have to jump through so many hoops and provide so much information about myself?”

The short answer? What you are giving pales in comparison to what you receive.

What do we mean by that?

When you sign a NDA you are then given access to potentially devastating information – most importantly the name and address of a particular business.

Why is the name and location such a big deal? This information is kept under a veil of strict confidentiality for good reason. When the for-sale status of a business is disclosed bad things can happen. Most people wrongly assume that a business for sale is a business on the brink of collapse, although that is rarely the case. When a staff finds out the business is for sale, they can all quit en masse. When clients find out a business is for sale they can jump ship to the competition. The repercussions of the disclosure of the for-sale status to the wrong people can be catastrophic.

As such, business sales are done behind closed doors, behind non-disclosure agreements and done out of the sight and earshot of the staff and clientele.

In some cases a seller might also require a financial disclosure from you before the name and location of the business can be discussed. From a seller’s perspective this makes sense. The fewer people who know about the for-sale status, the better – so they may only want to grant access to buyers with the financial means to actually purchase the business. Think of it like having to provide a real estate agent with a pre-approval from a bank to see a house (which is very, very common).

Once you have signed the NDA and provided proof of funds, you will not only be given access to the name and location of the business. You will also get access to financial records, employee information, contract information, proprietary information and the like. What a seller is providing to you is far more than you are giving in return.

Are you looking for a business to buy and have been frustrated by the lack of information you can find online? Would you like to know more about the NDA you will have to sign? Ask us! Please leave any questions or comments and we would be happy to help.

Michael Monnot

Buying A Business? How To Consider COVID “Slumps And Bumps”

Posted in Buyers Articles

Published June 3, 2024

In the time before the pandemic, business buyers would typically request 3 years of tax returns when considering a business. If you’re looking at businesses in 2024, those three years of records land you squarely in the throws of the pandemic – where many businesses struggled or faltered and a few pivot-capable businesses did very well.

How do you make heads or tails of numbers that can show a huge slump or a huge bump? Maybe don’t consider those numbers as hugely significant.

If you do ignore the COVID numbers, you’ll have company. According to the IBBA Market Pulse Q1 Executive Summary “Q1 2024 survey results indicate that the vast majority of M&A advisors believe buyers are largely disregarding the financial impact, whether positive or negative, that COVID-19 had on acquisition targets. A combined 80% of respondents agreed or strongly agreed that buyers are mostly ignoring any ‘COVID slump’ or ‘COVID bump’ when assessing a company’s financials.”

This tendency to ignore the pandemic years makes sense when you consider that the businesses that made it through this period were doing something right, and the ones who saw a huge spike in profits because of something they did related to COVID have likely seen those metrics fall as the pandemic became less of a concern.

What can you do then when you look at the track record of a business in the post-pandemic market? Ask for more years of records. Many buyers now ask for 2019 to today, or even the last ten years of tax returns. This over-arching view of a longer period of time will likely give you a better sense of how this business fared before and after the shut downs and mayhem – giving you a better perspective.

Are you looking at businesses and want to know more about how to interpret the numbers during the pandemic? Do you have questions about what time period of records you should ask for? Ask us! Please feel free to leave any questions or comments here and we would be happy to help.

Michael Monnot

Messy Financials – Why They Shouldn’t Scare Buyers And Should Motivate Sellers

Posted in Buyers Articles, Sellers Articles

Published May 27, 2024

Owning a business is a lot of work. Day to day operations, issues that need to be resolved – it can be hard to keep up with everything. This usually means that keeping your financial records in order slides to the end of the list. It’s tedious, annoying, time consuming and sometimes feels like it can wait in the box under your desk in favor of something more pressing.

This procrastination can become a problem, however, if you find yourself in a situation where you need to sell your business. How can you prove to prospective buyers that the business is worth what you say it is if your records are a jumbled mess?

What about on the other side of the table? If you’re a business buyer you might have noticed that the financials you seem to see from small businesses can barely be called “financials” at all. A copy of a P&L that’s been faxed too many times, some scant numbers that seem to be derived from thin air – it can be hard to parse out how a business is actually doing.

Does poor record keeping always mean a business isn’t doing well? Absolutely not. What it does mean is a seller is leaving money on the table and a buyer has room to negotiate.

If you are considering selling your business, or if you aren’t planning on selling now (but you will be selling in the future) the time to straighten out your books is NOW. Pull out that box from under the desk and start working through it whenever you have a chance, or hire someone who can do that for you. Your business can only look its best on paper if your papers are in order. A business with clear, concise records can easily prove the value that you’re asking for. It also shows prospective buyers that you’ve been an organized owner, which translates to more faith in the business.

If you’re looking at businesses to buy don’t immediately pass over a business with messy books. Think of a business like this like a house with good bones that needs a little work. If that work has to come from you after you buy it – guess what? You can negotiate for a better price. Notice we said “good bones” – not all businesses that have issues keeping their records in order are in great shape otherwise. Seek the advice of your business broker and/or a business transaction CPA to figure out if this business is worth negotiating for.

The message here is that big box of jumbled records is fairly common in the small business world. If you’re a seller, get those records in order. If you’re a buyer, look for those opportunities to get a great deal.

Do you have questions about how to make your business look top notch to buyers? Would you like to know more about how to interpret messy records? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

Buying A Business? 6 Ways To Set Yourself Up For Success

Published May 21, 2024

Buying yourself a business is a big deal, and you obviously want to give yourself the best chance at success.

How can you give yourself a leg up before someone hands you the keys? Here’s 6 ways:

1. Do your homework

This one might sound ridiculous – but most people would be shocked at how little research some business buyers do. You shouldn’t just be searching business listings. You should be looking at market trends, looking at what types of businesses are doing well and what types of businesses are struggling, what the local market actually looks like in the areas you’re considering, who your competition would be and how they’re doing things differently, what the areas for potential growth are, what the marketing opportunities could be – the list is long and should be exhaustive. You should have a decent grasp on the area, the market and the trends long before your first meeting with a seller.

2. Stay within your skillset

When you make a major life change like buying a new business it can be tempting to jump into something completely new, but if you’re buying a business this is a huge mistake. Taking over as the owner of a business is hard enough because there’s a steep learning curve. You have to learn absolutely everything. Buying a business where you have zero practical experience takes that learning curve and makes it terrifyingly steep. Do yourself a favor and look at business opportunities that will utilize the skills you already have.

3. Make yourself a business plan

Starting any new venture without a plan is foolhardy at best. You need to go into your new business with an idea of where you think the business is headed, what you need your metrics to be in order to remain sustainable and where the line is when you walk away and lock the doors. A properly laid out business plan will help you hit the ground running, instead of guessing where you are and where you need to be.

4. Don’t kill all of your capital

If you have $100,000 to spend on a new business, you should not be looking at $100,000 businesses. You need to reserve a decent chunk of your available capital for all the things you’re going to need to spend money on. Commercial rental deposits, licensing and permitting fees, initial payroll, new inventory orders, etc. Burning up all of your capital with the purchase alone will put you in a very precarious position right out of the gate. Reserve some of your cash to keep yourself from ending up in a bind.

5. Don’t focus on the wrong things

It can be exciting to walk into your new business on your first day as owner and “make it your own” – the temptation can be enormous to immediately start changing things to your liking. The problem here is you bought a functional, operating business. You have no idea on day one why that business is able to keep the doors open. Too many changes too fast (particularly changes meant only to satisfy your tastes) are almost always a waste of resources and time – and have the potential to drive away your regular clientele and staff. Focus on learning why things are the way they are, then make slow and incremental changes as needed.

6. Don’t ignoring marketing

Many small businesses fail to use every marketing opportunity – some because of lack of time or resources, some because of burnout. Many new business owners walk in on day one and focus all of their energy on things other than marketing. Learning the business, getting to know the staff and regulars, making changes and the like. While these are important parts of your first days as owner, a big chunk of your energy should be focused on getting that business out to as many new customers as possible. Maybe the business needs a new website, maybe it needs a social media strategy, maybe it needs more community engagement. You need to be planning your new marketing strategy before you get handed the keys so you can begin to roll it out on day one.

The message here is there are some very important things you can do both before you buy your new business as well as in your early days as owner that will help you set yourself up for success.

Are you looking at businesses to buy but aren’t sure what types of businesses would fit with your skillset? Would you like to know more about how to create a business plan or how to implement a new marketing strategy? Ask us! Leave any questions or comments here and we would be happy to help.

Michael Monnot

Why Buying A Bar Can Be A Good Or A Bad Idea

Published May 6, 2024

A smart, capable guy who has never worked a single, solitary second in the restaurant industry buys himself a bar – and within six months he’s out of business. How does that happen?

We like to use the classic bar example because it illustrates a really crucial point that all business buyers must consider. You really need to have some practical experience if you want to have hope for success.

Why?

Getting handed the keys and walking in to run the business you now own is a daunting, uphill task. You have EVERYTHING to learn. How the business runs, what the standard operating procedures are, how to run payroll, how to keep the books, how to manage the staff, what contracts need to be fulfilled and renewed, how to fix equipment, how to keep on top of your licenses and permits, etc. – the list is incredibly long.

What you don’t want to do to yourself is add learning an entirely new industry to the mix. You really need to know something about what a business like this is like, day to day. Otherwise you’ve just created an alarmingly steep learning curve for yourself. One that many, many failed business owners have been unable to overcome.

We’ll go back to the bar example. The guy who bought the bar wasn’t necessarily bad at running a business, the issue was the type of business he bought.

Bars are fun when you patronize them, but many people mistakenly assume that owning a bar will be just as fun – particularly those people who have never worked in one.

The hours are long and brutal because your day starts in the morning for deliveries and the like and then ends extremely late at night after last call and cleaning. The margins can be razor thin, you constantly have to monitor your staff as theft is easy, you have to stay on top of your inventory, employee turnover is high so training new staff is a constant (as is having to work the shifts yourself for said staff when they can’t or don’t show up), you have to watch for fake ids, overserved patrons, support your staff when it’s busy – all things a former bar employee would know.

Lots of people leave their 9 to 5 jobs and buy a bar because they think owning a bar will allow them to make their own schedule, be able to attend their kid’s baseball games in the evenings and sit at their own bar having drinks with their favorite regulars a couple nights a week. See how vast the difference is between the dream and reality? That vast gap is the reason people fail.

How do you keep this from happening to you?

Buy a business in an industry where you have some practical experience. An accountant doesn’t have to buy an accounting firm, but they can buy a business that uses the practical skills they’ve acquired as an accountant.

And if you really want to buy a bar, go spend a couple of months working in one first. Learn the ins and outs. See if you really want that life. If you do, fantastic. You can now use those skills and practical experience to make the purchase of a bar successful.

Have you always wanted to own a particular type of business but hadn’t considered the importance of practical experience? Would you like to know what types of businesses could work for you with your specific set of practical experience? Ask us! Leave questions or comments for us here and we would be happy to help.

Michael Monnot