Why Feedback Matters: Helping Your Business Broker Help You

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

Published October 4, 2021

 

Are you just beginning your business search? Your first step should be talking to an experienced and qualified business broker about what you are hoping to get out of business ownership.

 

What do you want your life to look like? How much money would you like to spend and how much do you need your new business to earn? Where do you want your business to be located? A good broker will take your answers to these first and basic questions and put together a list of listings for you to consider.

 

Here’s an important point in the process that some buyers miss:

 

Once you have those initial listings take a good, hard look at them and then decide not only if you like or dislike a business – but WHY.

 

Was it the location? The net/gross earning? The number of employees? By giving very specific feedback your broker can fine-tune the search, giving you better choices as the search process progresses. If you are vague with your feedback or give none at all, you will more than likely just continue getting businesses you don’t like – a counterproductive waste of time.

 

A good business broker can point you in the right direction and help you find the right listings, but they can only be effective in that capacity if you give them feedback. Lots of feedback.

 

Why can’t I just look at everything? Why do I have to keep giving feedback?

 

Giving very specific feedback on why you did or didn’t like a business will make your business search more efficient – weeding out listings that you wouldn’t have liked well before you have to take a deep dive. It also helps show your business broker that you are a serious buyer who is willing to put in the work required to get a deal done. No one wants to work with someone that isn’t going to participate – and buying a business is a complicated process best traversed by someone who is willing to do what’s needed to see it through.

 

Another note here. Negative feedback about why you disliked or hated something about a business is important, as you don’t want to end up with a business that will make you unhappy – but feedback about why you liked something is also pivotal to success. Did you really like that a particular business had X number of employees or did you love the type of area where a business was located? Don’t just give your broker the negative feedback. Telling them what you liked about businesses will be just as important as what you didn’t.

 

Are you beginning your business search and want to know more about how feedback can help streamline the listings you see? Would you like to know what businesses are currently available that would meet your goals for business ownership? Ask us! Please feel free to leave any questions or comments and we would be happy to help.

 

 

 

Michael Monnot

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

www.InfinityBusinessBrokers.com

 

 

 

 

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Buying A Business? Don’t Sign A Million NDAs (Do This Instead)

Posted in Become a Business Owner, Buyers Articles

Published September 27, 2021

If you’re excited about buying a business it might be tempting to spend your days scouring the internet for business listings and then requesting information on everything that even slightly matches what you’re looking for.

 

 

Don’t do that. Here’s why:

 

Businesses are bought and sold under a veil of confidentiality. That confidentiality exists to protect the business while it is being sold (you can read more about why here). What this means for you as a buyer is you can’t just look up a listing and immediately get all of the information on a business for sale. There’s a layer of legal protection that you need to get past before you can gain access to the information you need. That layer involves signing a non-disclosure agreement (NDA).

 

Signing the NDA means you can’t disclose the name of a business, the location of a business, any proprietary information you will now have access to – even the for-sale status of a business. You will have to sign a NDA for each business listing individually. If the business brokers involved are doing their job, you shouldn’t be able to sign the NDA until you’ve had a conversation about why this business fits with your goals for business ownership and if you actually have the funds necessary to make a sale happen. The importance of keeping the for-sale status of a business under wraps means a broker should only be allowing NDAs to be signed by potential buyers who could actually be buyers – not hundreds of random tire-kickers.

 

The necessity of confidentiality might initially seem frustrating as a buyer, but it’s not just the business itself this process helps. As a buyer, you don’t need to be wasting your time signing dozens and dozens of NDAs for businesses that would never have suited you in the first place. It’s a colossal waste of your own time and energy.

 

Here’s what you should do instead. Call a few business brokers. Have conversations with them about what you hope to get out of business ownership. Talk to them honestly about the amount of funds you have available for your new venture. See if you think you and a broker would work well together.

 

This initial conversation will help a good broker find listings that will actually check all of your boxes. Then you can efficiently sign NDAs for businesses that may work for you.

 

A very important note here. Once you have a broker you like – don’t go and sign NDAs on any listings without them. Once you’ve signed another broker’s NDA your broker can’t help you anymore. NDAs are tied to specific businesses, and are therefore tied to the listing and the listing broker. Your broker can request the NDA on your behalf for a listing that isn’t theirs and still maintain the buyer-broker relationship with you. If you go around your broker and sign a NDA they didn’t request they legally and ethically can’t even give you advice. The relationship has now shifted to whatever broker has the listing – a broker you don’t know and who doesn’t know you. 

 

The message here is although the process of searching for businesses has a few more steps than other big purchases like a house or car – those steps exist to make the process more efficient for everyone – including you. Find yourself a good broker, maintain that relationship by only having your broker request NDAs and be patient with the process.

 

Are you shopping for businesses and weren’t aware that signing NDAs tied you to listing brokers? Do you have questions about what businesses currently for sale you meet your goals for business ownership? Ask us! Leave any questions or comments and we would be happy to help you on your business search.

 

 

 

Michael Monnot

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

www.InfinityBusinessBrokers.com

 

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3 Important Points Every Business Buyer Should Know

Posted in Become a Business Owner, Buyers Articles

Published September 20, 2021

Businesses are inherently complicated. You are dealing with staff, vendors, clientele, a location or locations, possibly vehicles, inventory, computer systems and software, operating procedures, leases, licensing requirements, permitting requirements, inspections, certifications – the list goes on.

 

If you are considering becoming a business owner and entering the world of entrepreneurship by buying an existing business, then the complicated nature of businesses not only includes the business itself but also the process to buy it.

 

If this is your first time in the business for sale market, then there are a few things about the process you must understand in order to be successful.

 

 

This Will Be Nothing Like Buying A House

This one is the biggest misconception. It will cause major problems between you as a buyer and the sellers and business brokers involved if you don’t immediately banish this thought from your mind. You don’t search “businesses for sale” on the internet, see pictures and collect addresses, then drive around with a business broker for tours. That is what you would do if you were buying a house. Businesses for sale keep that fact completely confidential, and as such you can’t call up a business broker and ask him to “show you some businesses”. In the business sale process, there are many more steps. You will first be required to sign non-disclosure agreements, then you will likely have conference calls and/or meetings with the sellers and brokers off-premises long before you get a “tour” of the business. The non-disclosure agreements also mean that you will not be able to tell anyone outside of the transaction what business you are considering buying until after you get to the closing table.

 

Most “Buyers” Don’t Buy Anything

If you are really serious about buying a business, then you will need to be prepared for the reality that those who are already in the business market – think sellers and brokers – are unlikely to give you the time of day. Sure, you are poised to write a very big check to someone for their business, but the fact is only about 10% of buyers who initially look at businesses actually end up buying one – so the other players in the game will initially have a hard time taking you seriously. What’s important here is not to be offended. If you worked in an industry where only one in ten people who vied for your attention actually followed through, you would be a bit picky about who you chose to spend your time on too. You can pull away from the tire-kicking pack by staying motivated, being honest and upfront about the finances you are intending to invest in a business (particularly with your own business broker) and by making good offers on the businesses you like.

 

Patience, Patience, Patience

We have all become very accustomed to instant communication and instant gratification in our technological world, but the complexity of businesses means you can’t get or do everything you want immediately. You can’t show up on a Thursday and expect your broker to be able to line up three or four businesses for you to “see” on Friday. When you request information from sellers, you need to be aware that in addition to dealing with you they are also trying to run a business, so it may take them a few days to get things back to you. You are (one would hope) not your broker’s only client, so if they don’t answer the phone or immediately return your call it doesn’t mean that they are blowing you off. When you send financial records off to a CPA or contracts off to an attorney to be reviewed, you will have to give it some time to get those documents back. If you are dealing with licensing and permitting issues, you need to be aware that government agencies are not known for their speed. Just be patient with the process and everything should fall into place.

 

If you really want to buy a business know that with a good dose of patience, good offers and the understanding from the start that this process can be pretty complex, you have a great chance of finding the right business for you.

 

Are you a buyer who’s had trouble getting anyone to take you seriously? Do you feel like the process couldn’t be any slower? Do you have more questions about confidentiality or any other part of the process? Ask us! Please feel free to leave your comments or questions here and we would be happy to help.

 

 

 

Michael Monnot

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

www.InfinityBusinessBrokers.com

 

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Why All The Secrecy? Understanding The Confidential Nature Of Business Transactions

Posted in Become a Business Owner, Buyers Articles

Published September 13, 2021

 

If it’s your first time navigating the business-for-sale marketplace you may have noticed something that sets it apart from almost every other situation where something is for sale. Everything is a carefully guarded secret.

 

Business listings are vague and don’t disclose the name or location of the business.

 

Listings are very basic and don’t give you much in the way of details about a specific business. 

 

When you call on a business, the broker will continue with the vague information unless you are willing to give up some information about yourself (like your name and permanent address) and sign a nondisclosure agreement (NDA).

 

What gives? How am I supposed to find a business if no one will tell me which businesses are actually for sale?

 

An existing business can’t be sold like most other things because an existing business exists in a world of powerful misconceptions. Those misconceptions are that a business for sale is a business on the brink of failure. When the average person sees a for-sale sign on a business door, they automatically assume that the business is in dire straits. Why would anyone sell a successful business, right? 

 

Well, there are a lot of reasons. Maybe the current owner is ready to retire or has their heart set on a new life adventure that will mean they can no longer run the business. Perhaps the current owner started or bought this business with a specific set of goals, and now that those goals have been achieved it’s time to move on to another project. Sometimes owners have something occur in their personal lives that will make it difficult to maintain the responsibilities of ownership and so they’d like to leave the business in good shape and go attend to what they need to. 

 

It’s actually relatively rare for a faltering, disaster of a business to be sold. In situations that dire most choose to lock the doors, cut their losses and walk away.

 

What does that mean for business buyers? Most businesses for sale are great business opportunities. 

 

To remain great opportunities, those businesses need to be protected. Those powerful misconceptions about a business for sale can cause massive problems for an existing business if they simply stick a for-sale sign on the door. The entire staff can panic and quit. Vendors can cancel contracts. Current and prospective customers can choose to do their business elsewhere.  

 

A business is protected throughout the sale process by keeping the for-sale status confidential. The only people who can know the business is for sale are the seller, the brokers involved, prospective buyers and their experts (think attorneys and CPAs) who have signed the appropriate nondisclosure agreement.

 

What does this means for you as a buyer? You will have to use vague business listings to do a cursory search. When a listing seems to fit with what you’re looking for you will have to give out a tiny bit of information about yourself (that helps to identify you as an individual) before you can be given potentially damaging information about a business on the market – namely it’s status as a business for sale. 

 

Here’s what you can’t do. You can’t change the industry standard NDA to suit your liking. You can’t disclose what businesses you’re looking at to your neighbor or the guy in line with you at the coffee shop. You have to play by the rules that everyone does so businesses can stay in good shape while they are being sold. 

 

Are you considering buying a business and want to know more about the confidentiality of the process? Do you have questions about what signing the NDA means for you? Ask us! Leave any questions or comments and we would be happy to help.

 

 

 

Michael Monnot

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

www.InfinityBusinessBrokers.com

 

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Ready To Take The Plunge? Buying An Existing Business

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

Published August 30, 2021

Have you always wanted to own your own business but aren’t sure how to take the plunge?

 

 

 

One path to entrepreneurship that many choose is to buy an existing business. This can be a good option for a number of reasons.

 

First and foremost, the business has already been set up for you, and the business model has been proven because the business is currently up and running. The location is equipped and a customer base has been established too.

 

What do you need to do to get started if this is the path for you?

 

The first step is deciding on a type of business to buy. More often than not, a budding entrepreneur will start the process by seeing what businesses are available. This is a mistake because it can cause you to fall in love with a business that wouldn’t meet the goals you have for business ownership.

 

When entering a new business venture, you should choose something where you have at least a bit of background or experience. The learning curve for a new business owner is a steep one, and that’s without having to learn an entirely new industry as well. Give yourself a great head start by deciding on an industry before you search, and be sure to pick an industry you know.

 

The second step is to begin your search. Now is a great time to employ the services of a business broker, as they will have access to more business listings than you will be able to find on your own, they will know about businesses that are not yet on the market, and they will be able to market you as a buyer to other business brokers and their sellers.

 

Talk to your broker about the goals you have as a business owner – like how many hours a week you want to work, what type of return you are looking for with your investment, where your experience will suit you best and how much capital you have to invest. Identifying your goals, experience and available capital are critical to finding you a business where you can be successful. If the broker you are working with hasn’t had this conversation with you, perhaps it is time to find someone else to work with.

 

Once you have your goals ironed out and know what industries would set you up for success, you can do a cursory search for businesses by visiting our Business Search page.

 

Once you find a business that fits your goals, you will likely decide to make an offer. This step is then followed by a period called due diligence where you will get a chance to review things like finances and contracts in depth. After this review you will decide if you would like to proceed with the sale or not.

 

Are you ready to take the entrepreneurial plunge? Do you have questions about the search process or are you unhappy with the help you are getting from your current broker? Leave us a comment or question; we look forward to assisting you with your business search!

 

 

 

Michael Monnot

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

www.InfinityBusinessBrokers.com

 

 

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It’s A Process: Why Business Buyers Need To Be Tough

Posted in Become a Business Owner, Buyers Articles

Published August 23, 2021

It probably shouldn’t be a surprise that buying a business can be a bit of a process.

 

You have to sign non-disclosure agreements, go through documentation, have meetings and conference calls, deal with bureaucratic red tape for licensing and permitting, negotiate with sellers and landlords – all while making the massive decision of whether or not this business is for you.

 

The process might seem difficult, but it’s not impossible. Businesses are inherently complex, and business transactions involve a lot of moving parts and people.

 

What happens far more often than it should is a buyer gets fully immersed in the process, decides it’s too aggravating and throws in the towel – leaving a perfectly good business ownership opportunity behind.

 

If you are considering business ownership, you should consider this – if you can’t handle the stress and rigors of buying a business, you probably can’t handle the stress and rigors of owning one either.

 

 

Entrepreneurship is just as tough as the business buying process, and it’s not for everyone. If you are considering the leap into business ownership you need to take a moment and decide if it’s the right move for you. Owning your own business is incredibly rewarding, but those rewards come with a lot of work. If you are ready, willing and able to do that work then you can easily survive the business buying process by having one major thing – patience.

 

Here’s why. It will take some time for you and your broker to decide what types of businesses and what industry sectors will best suit your goals for business ownership and your practical experience. Once you know what you’re looking for you and your broker will have to search for businesses that will fit your budget too. Once you’ve found a few promising candidates, you will need to sign non-disclosure agreements and then wait for the seller and seller’s broker to get you some cursory information on the business. If you like what you see, you can make an offer on a business – but then you will have to wait for the seller to either counter your offer or accept it. If the offer is countered, it will probably take some time to arrive a price both sides can agree on. An accepted offer means due diligence can start, but only when the seller has provided all of the requested documentation. Getting all of the requested documentation also takes time, as a seller is not only trying to round up all of the paperwork you’ve requested, they’re also trying to run their business too. After due diligence, the final purchase contract will take some time to put together and a new commercial lease will need to be worked out with the landlord. You will also need to deal with obtaining or transferring all of the licenses and permits the business needs.

 

See a trend? Everything takes time, and as such everything takes patience. The goal is business ownership, and a tough entrepreneur will be able to make it through.

 

Are you looking for businesses to buy but feel like the process might be too overwhelming? Would you like to know more about what it takes to buy a business and what kinds of help are available to you? Please feel free to leave any questions or comments, we would be happy to help!

 

 

 

Michael Monnot

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

www.InfinityBusinessBrokers.com

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Buying? Why Flexibility And Patience Are Your Best Bet

Posted in Become a Business Owner, Buyers Articles

Published August 16, 2021

Most business owners and people considering business ownership have a particular type of personality. You could call it type-A, but it’s a bit more nuanced than that. Entrepreneurs are a tough bunch, used to taking risks and working hard to turn those risks into rewards. They’re comfortable with the idea that the buck stops with them and if they fail they only have themselves to blame. 

 

This grit-based type of personality serves a business owner well. It gets you out of bed in the morning, it drives you to succeed. It’s a good thing – most of the time.

 

Here’s where having this type of personality can hang you up. The process required to buy a business. 

 

 

The business transaction process can be a bit arduous. While an entrepreneur will probably have no trouble with the list of things that need to be accomplished – it can be extremely tough to navigate the difficulties that arise during the purchase of a business because no ONE person can be in control. That’s right. You can’t control the process. 

 

This can cause entrepreneurs to balk at basically any part of the business transaction. From refusing to sign an industry-standard NDA because you didn’t write it, refusing to share your address in order to access proprietary information about a business you are considering, demanding an in-person walk through of a business location before you’ve ever asked a single question of the seller – the list goes on and on. 

 

Look, we get it. When you’re used to being the one in command it can be deeply difficult to relent to someone else’s rules. Here’s what you have to remember. The business transaction process exists and proceeds the way it does for a reason. It works to protect businesses for sale while they are being sold. If it was your business on the market – you would absolutely demand that everyone play by the rules so your business wouldn’t falter. 

 

If you are considering buying a business, you are going to have to let go of the notion that you will be in control. You have to sign NDAs. You have to provide your personal information in order to receive proprietary information about a business. You have to be patient with the seller when they are collecting the documentation you requested. You have to wait for people to call you or email you back. You can’t demand that everyone involved do what you want, when you want it – and then get upset when it doesn’t happen.

 

We aren’t saying that you should relent to everything. Buying a business is a huge decision and you should have timely access to all of the information you need to make an educated decision. What we are saying is you need to be flexible and patient in a way you may not be used to. 

 

Are you thinking about buying a business and want to know more about what the process looks like? Would you like to know more about the timeline of a business transaction? Ask us! Leave any questions or comments and we would be happy to help.

 

 

 

Michael Monnot

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

www.InfinityBusinessBrokers.com

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Buying A Business? The Unconventional Questions You Should Be Asking

Posted in Become a Business Owner, Buyers Articles

Published August 9, 2021

When you start looking at businesses to buy, you will probably have a list of questions you’ll want answered by sellers. The typical questions, like “why are you selling” and “how long have you owned the business” might seem pivotal.

 

However, there are a handful of more unconventional questions you should be asking that you may not have considered. Here’s a few:

 

“Why now?”

 

The “why are you selling” question is an important one, but another very important question needs to be based on the timing of the sale.

 

Sometimes the answer to both questions is the same – like in the case of a seller who is putting the business on the market because a sudden health emergency will prevent them from remaining a functional owner. This scenario would not indicate issues with the business, rather personal issues with the current owner.

 

If there is not an impending emergency forcing the sale, then the answer to the “why now” question will be critical. 

 

If a business appears in good shape, then the “why now” answer should be something along the lines of “well, we’ve reached pivotal markers in the long-term exit plan for this business, and we are ready to move on to other ventures.” The seller in this situation decided long ago on the future sale of the business, and has been readying the business in that time.

 

If the answer to the “when did you decide to sell” question is “well, we decided recently” – then you should dig much deeper into the business, as a sudden urge to jump away from a perfectly good business should seem suspect.

 

“How did you come up with your listing price?”

 

For a seller the evaluation of their business can be tough. They’ve invested countless hours, large amounts of money and tons of energy – and placing a monetary number on something so life encompassing can feel nearly impossible.

 

A listing price should be based on realistic terms, like the money the business generates – not on the emotional value or the sum of every penny the seller has ever spent on the business.

 

When looking at businesses be aware that some sellers find brokers who are willing to list the business for whatever the seller wants (no matter how ridiculous) just to have the listing. The prices of these businesses will be highly inflated and there will be no justification.

 

“If you had unlimited resources, what changes would you implement for growth?”

 

Sometimes businesses remain stagnant and have limited growth because of lack of funds, sometimes it’s simply an apathetic and burned out owner. Any seller who has an eye on the future and an eye on growth will already have considered this question and have an immediate answer.

 

If a seller hesitates or can’t come up with a reason, then they may not have been conducting their business with an eye on the future. Not good news for a new owner taking the wheel unless it means it can become a point of negotiation. 

 

When you are looking for a business to buy, don’t just ask the basic questions. Questions like the ones above delve deeper into the motivations and actions of a seller and can tell you volumes about a business. Talk to your business broker about the kinds of questions you can ask that will get you better information. These great questions will be pivotal in those critical first conversations with sellers. 

 

Are you a business buyer who would like to know what other questions you can ask sellers to delve deeper? Would you like to know more about what answers to these types of questions might tell you? Ask us! Please feel free to leave a comment or question here, and we will be happy to help.

 

 

 

Michael Monnot

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

www.InfinityBusinessBrokers.com

No Comments »



Surviving Cold Feet: Advice for Buyers and Sellers

Posted in Buyers Articles, Sellers Articles

Published August 2, 2021

A business changing hands is a big deal. If you’re buying a business it means you have to write a very large check and you’ve just bought yourself a new job – one where success may not be a sure thing. If you’re selling your business, then you’re about to hand your baby – your blood, sweat and tears – to a complete stranger. You’re also about to be out of a job. 

 

These are some high stakes, and as such emotions can run really high in a business transaction, particularly as you approach the closing table. Guess what? It will probably be very hard to keep from feeling overwhelmed and taking things personally. 

 

Here’s the key to success. As difficult as it might be, don’t take things personally and understand that a decent case of cold feet is completely normal.

 

 

Perfectly great business deals fall apart on a regular basis because as the end of the transaction approaches one or more of the parties involved gets a serious case of cold feet, panics and kills their own deal. While there are (on very rare occasions) catastrophic issues that will derail a deal at the end, for the most part a deal that dies near the closing date dies for no good reason at all. It typically comes down to nothing more than cold feet and hurt feelings. 

 

With lots of money changing hands and lots of decisions needing to be made – it can be easy to get overwhelmed and decide that it would be far easier to walk away. The stress of a small business transaction can cause even the most seasoned entrepreneur to crack. Understand that the high stress, raw emotions and second-guessing are coming and that it’s a totally normal way to feel as you approach the end of a business transaction. 

 

Here’s a couple of tips to help you make it to the closing table: 

 

The old adage that it’s best to sleep on a big decision exists for a reason. Knee jerk reactions are rarely productive, so if you’re starting to feel panicked and like maybe this whole transaction isn’t for you – take a breath and step away from it for a minute. Talk to your business broker about your concerns. They’ve been down this road many times, and can help you see the forest through the trees.

 

No business transactions happen overnight, so the months and weeks that have led up to this point have given you all the information you need to make an intelligent decision. If yesterday you were fine with the deal and overnight you’ve decided it’s a terrible idea – you probably need to go back and think about all the reasons why you made this decision in the first place. 

 

Have patience with yourself. No matter which side you’re on, this is a big decision and it’s completely normal to feel a little overwhelmed. What you shouldn’t do, however, is let that overwhelm cause you to kill a perfectly good deal – one that would have met the goals that you’ve been trying to meet for months. 

 

Are you nervous about buying a business? Do you have questions about what selling your business might be like? Ask us! Leave any questions or comments and we would be happy to help!

 

 

 

Michael Monnot

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

www.InfinityBusinessBrokers.com

No Comments »



Talking About Your Finances – Advice For Business Buyers

Posted in Become a Business Owner, Buyers Articles

Published July 26, 2021

Talking personal finances with anyone, let alone someone you don’t know very well, can be an intensely uncomfortable experience.

 

Conversations about how much money you have, how much money you make, what you can and can’t afford – these are typically considered off limits in normal day to day interaction.

 

 

When you enter the business marketplace with the intent of buying a business, you will be confronted with these seemingly intrusive questions basically from the start, and that can make the process of finding a business somewhat uncomfortable if you aren’t ready to talk about your money.

 

Who’s asking about my money?

 

The first person who will be asking about your financial situation is your own business broker – but you will also likely have to disclose financial statements to sellers, their brokers and the property manager or landlord of the business location.

 

Why do I need to be ready to talk money? Why can’t I just look at businesses I know I can afford?

 

While you might feel that it isn’t anyone’s business how much money you have for the purchase of a business, it is critically important that your own broker in particular knows how much you are working with. One of the major mistakes that buyers make is misjudging how much capital they will actually need to buy, and then run, a business. For example, if you have $100,000 available to buy a business, you probably shouldn’t be looking at businesses that are listed in the $150,000’s with the hopes of negotiating down. You need to remember that in addition to the purchase price, you will need to have funds available for licensing and permitting, for purchasing additional inventory, for securing the commercial lease and for keeping yourself afloat long enough to get the business turning a profit with you at the helm. If you use every last cent of your available cash to write the check at closing, then you have set yourself up for immediate failure.

 

What should I do instead?

 

Be very open and honest with your business broker from the start, and then listen to their advice about what businesses you can and can’t afford. A good broker doesn’t want to see you fail because the success of the small business community is a broker’s bread and butter. Don’t be offended when your broker says “you can’t afford that” because they want you to succeed – not shoot yourself in the foot.

 

What about a deal with seller financing? Doesn’t that mean I can buy any business?

 

Definitely not. Many buyers come to the market expecting to put very little money down and have a seller finance the rest – but that isn’t how seller financing actually works. You typically need to put at least 50% down – if not more – for a seller to take your offer seriously. If seller financing is involved, a seller is also going to want to see that you have the right amount of cash to keep the business running and profitable long enough for you to pay them back, so you will need to reserve some of your capital for simply running the business.

 

Why does the landlord need to see financial information? The money the business makes is what will pay the rent, right?

 

Landlords and property managers want to see that you have the money to pay the rent, even if the business isn’t doing well. From the landlord’s perspective, they already have a lease with the current owners that guarantees them full payment of the remainder of the lease, so if you come to the table with anything less – they have no motivation whatsoever to approve you to rent the space.

 

The message here is if you really want to buy a business, you will have to get used to the idea that people are going to want to know how much money you are working with, and then they will want to see proof of that number. You will also need to get used to the idea that there will be some businesses that are simply out of your range, and that the person you have hired to help you through the business buying process (your broker) will need to be able to be honest with you about what those businesses are – without you getting offended.

 

Have you looked at businesses but can’t figure out how much capital you would need? Do you have more questions about what kinds of financial information you would need to disclose? Ask us! Please leave a comment or question here, and we would be happy to help.

 

 

 

Michael Monnot

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

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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