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Buying A Business? 3 Big Things

Published May 3, 2021

When you are considering buying a business and joining the entrepreneurial world, there will be many challenges along the way.

The process itself can be complicated and frustrating, but the key to success is patience. If you are ready to begin the buying process, here are 3 things you should keep in mind:

#1: Stay calm

Buying a business is a daunting, time consuming and challenging process – particularly if you are new to the game and have never bought a business before. When you are negotiating with business sellers, working through complex contracts, ironing out the details of your new commercial lease, dealing with the bureaucracy that is required to obtain the proper permits and licenses – what might start as a minor frustration or hiccup can morph into a big problem if you let it. Deals can fall apart because a buyer is impatient with the process, and instead of working through each issue they throw in the towel instead. In small business buying, patience is the key. So is working out small issues before they become big ones.

#2: Let go of looking for “perfect”

One of the major challenges we deal with is breaking the false assumption that somewhere out there is a gold, gleaming and perfect business. The perfect business is a myth, and chasing that myth will keep you in business search purgatory forever. All businesses have underlying issues, skeletons in the closet and the like. If you are looking at businesses with the goal of actually buying one, you will have to decide which issues you are willing to deal with and which ones you aren’t – instead of eternally searching for “perfect”.

#3: Get some help

If you are buying a business for the first time you will have a far better chance of success with someone who knows what they’re doing by your side. That person is a business broker. Business brokers can help you figure out which industry, size of business, location, etc. will meet your goals – then find you businesses that fit the bill. They can also garner cooperation from other brokers (a nearly impossible thing to do on your own), assist with all facets of the transaction, negotiate with sellers and commercial landlords, help with licensing and permitting, put together your purchase contract – the list goes on and on. Don’t go it alone.

There are very few situations that cannot be overcome in a business deal with a good dose of patience and a bit of negotiation. Stay calm, be realistic and let your broker lead the way.

Are you thinking about buying a business and have questions about the process? Have you been in the business market before and have a suggestion or advice for first time business buyers? Please feel free to leave a comment or question here!

Michael Monnot

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

www.InfinityBusinessBrokers.com

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Have A Favorite Real Estate Agent? Why You Shouldn’t Use Them For Your Business Deal

Posted in Buyers Articles, Sellers Articles

Published April 26, 2021

This one happens all the time. We get a call from a real estate agent who is inquiring about one of the businesses we have listed on behalf of a buyer, or is looking for potential buyers for a business one of their clients wants to sell. Perhaps they are a trusted agent for a client, and the client asked that they inquire on their behalf. We even have potential buyers and sellers call and request that we use their real estate agent for their part of the transaction.

We tell them how business transactions work. A real estate agent who refers a client to us will get a referral fee when the deal closes, all they have to do is get us the client’s contact info.

Sometimes an agent refuses to divulge their client’s information, demanding instead that we work with them on the deal. We refuse, so the agent moves on to a different broker to see if they can talk someone into working with them. Their clients don’t get access to business information or potential buyers, and are likely unaware that any of this is going on.

Why won’t business brokers work with real estate agents? Why do they require a referral of the clients instead?

It’s very simple. Real estate agents are very good at what they do – they sell property and homes. What they are not good at and likely know little to nothing about is selling businesses. You can liken the difference between a business broker and a real estate agent to the difference between a plastic surgeon and your general family physician. You would probably be very uncomfortable having your family doctor do reconstructive facial surgery – along the same lines a business broker specializes in the buying and selling of businesses. We would never try to help someone buy a house, it’s just not what we do.

What can happen if a real estate agent tries to help you buy or sell a business? Since they don’t know the ins and outs of the business transaction process, there is a good chance you will never see a closing table.

If you are a seller, a real estate agent will likely treat your business listing like a listing for a house. They will take pictures, gather some cursory financial information and then post this information on the MLS listing system. This is a complete disaster in the making. The most important part of selling an existing business is maintaining confidentiality. Without confidentiality, you stand to lose customers, employees, vendors and money. The only people who should know that your business is for sale are those who have signed the appropriate non-disclosure documents – not anyone with an internet connection who can search the MLS. A business broker knows how to confidentiality market your business, and they are also well-versed in negotiating leases, licensing and permitting concerns and will have relationships with other brokers and buyers who are currently in the market looking for a business like yours.

If you are a buyer, a real estate agent isn’t going to have access to any business listing information without talking a broker into letting them have it (which isn’t likely to happen). Many real estate agents also try to fill out the non-disclosure forms themselves, pretending to be the buyer, but all this does is garner mistrust with any sellers who will then feel like they’ve been duped when the truth is later revealed.

We understand your loyalty to your real estate agent – we have many friends in the real estate industry and we have used their expertise for not only our home purchases but also the sales and purchases for our family members. You shouldn’t feel like your real estate agent gets the short end of the deal if they refer you to a business broker – they get paid for handing over information and doing nothing more. They are doing you and your future business transaction a great service by putting you in more capable hands.

If you are looking to buy or sell a business, feel free to ask your real estate agent if they have a business broker they would recommend. Just be wary if your agent tries to talk you into letting them take the reins.

Have you tried to buy or sell a business using a real estate agent and have a story to share? Do you have more questions about the referral process? Ask us! Please feel free to leave any comments or questions.

Michael Monnot

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

www.InfinityBusinessBrokers.com

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Picking A Broker? Red Flags: What To Watch Out For

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

Published April 22, 2021

Whether you’re in the market to buy a business or have a business that you’re ready to sell – your best bet for success and reaching a closing table is hiring the right help. In the business transaction world that help is a business broker.

What do business brokers do? They help sellers list their business for sale. They put together marketing packages and business listings and then add those businesses on listing platforms. They keep the confidentiality of the for-sale status of a business in place by vetting buyers and having qualified buyers sign the appropriate non-disclosure agreements. They coordinate conference calls and meetings between buyers and sellers and act as an incredibly important buffer in the negotiation process. They help put together offers and help solidify purchase contracts. They give advice throughout the process, as their experience with business transactions can be invaluable for avoiding common pitfalls that can cause deals to fall apart. They help sort out commercial leases with landlords and property managers. They assist with permitting and licensing requirements. They assist with obtaining financing options. They coordinate with immigration attorneys to obtain Visas for international clients.

It’s a long list. A list you probably don’t want to tackle with someone who is terrible at their job.

How can you tell if a broker is a good broker? You can watch out for red flags.

Does this business broker have no online presence at all, or a website where the last post was 7 years ago?

The business transaction process, like most things, has gone digital in recent years – from electronic signatures to virtual walkthroughs and the like. If a broker can’t even maintain a basic digital presence, then they probably aren’t up to speed on other aspects of their job either.

Do the listings for a particular broker have a ton of spelling errors or always seem to be incomplete/incorrect?

The business transaction process requires a great deal of attention to detail. If a broker is willing to leave mistakes all over their listings, how careful are they with everything else? A listing and a marketing package are an important first impression of a business for buyers. If all you’re getting is some over-copied tax returns and 15 spelling errors, it might be time to find someone else.

When you contact a broker, does it take them an enormous amount of time to respond?

You can’t expect a broker to always pick up your call or immediately respond (they should have other clients and a life outside of work) but you should be able to get in touch with them in a reasonable amount of time. If you have to wait a week for a response, you might need to find another broker.

Does a broker claim to have proprietary formulas or methods that no one else in the business has?

Well, there’s probably a reason for that. Occasionally brokers will claim to have some magic metric (for example – for pricing businesses) that no one else in the industry uses. Every business is unique, so a big part of becoming a successful business broker is understanding that every transaction will be different and each business will require a different approach. There isn’t a better mousetrap – there’s only those who can adapt the process to get a transaction done and those who can’t.

The message here is you want qualified and experienced help – and you aren’t going to get that from someone who is careless with the most important parts of their job. Keep an eye out for red flags as you begin the business transaction process.

Another good metric? Ask any potential broker how much of their business comes from referrals. Someone who does a good job is going to get a great deal of their future clients from the referrals of past happy ones.

Are you looking for businesses to buy and want to know more about how a business broker can help you? Have you considered selling your business and want to know what our marketing packages look like in comparison to others in the industry? 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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The Waiting Game: Why Sellers Need Patience

Posted in Sellers Articles

Published April 15, 2021

When we finally decide we are ready to sell our business, we’re ready now. We’re ready for the next chapter. We can already see ourselves in the next phase of life – retired and playing golf, sitting on a beach somewhere or onto our next entrepreneurial project – whatever the daydream is.

There’s a big problem with the desire for now in the business marketplace. It can take a really, really long time to sell your business.

Sure, there are occasions where a business lists and sells relatively quickly, but this isn’t always the case. This usually occurs when it’s a seller’s market in general – as seems to be the case in 2021. That being said, even in a seller’s market it can take a while to get to a closing table.

Why? There are basically two reasons for this. Two reasons that will require you to have patience as a seller.

First, business transactions are complicated. There are contracts and leases to be negotiated, training that needs to occur, large amounts of money changing hands, time for attorneys to review documents, financing that needs to go through a process with lenders, licensing and permitting requirements, (for some transactions) Visas that need to be processed by consulates – the list goes on and on and on. Those layers of complication can hang up deals for days, weeks or months – even with very motivated parties on both sides. If you want to be a successful seller, then you need to be mentally prepared for your deal to get hung up somewhere (or multiple times) during the process.

Second, you have to wait for the right buyer. Every business is unique, and as such it takes a buyer with a set of goals that your business uniquely fills to make a deal happen. Depending on how niche your business is, licensing requirements for a new owner, your location, the physical abilities required to run your business, etc. it can take a bit of time for you and the right buyer to connect. In a typical year it can take somewhere around 9 to 12 months to get a deal from listing to closing – so you are going to need a large dose of patience if you want to see the process through.

It can be tempting to list your business for sale and then take your foot off the gas because you are more than ready for the next phase of your life – but this is an enormous mistake. Your business needs to look the best it can when you are trying to attract the right buyer, and it can’t look it’s best if you’ve stopped trying. Have patience, keep a focus on growth and keep your numbers strong until you actually reach the closing table.

Are you considering selling your business and want to know how long it’s currently taking to sell a business like yours? Would you like to know more about how to attract the right buyer? Ask us! 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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How To Avoid Becoming The Angry Whim Buyer

Posted in Become a Business Owner, Buyers Articles

Published April 12, 2021

As the world recovers from long lockdowns and regular travel begins, the entrepreneurs who have put their dreams of business ownership on hold can start the process again. Here’s the thing. Buying a business is a process. One that takes planning. Lots and lots of planning.

Why do we point that out? The angry whim buyer.

It happens constantly. We get a call or email from a buyer who is in town and wants us to drive them around to see a few businesses while they are here. Oh, and they leave tomorrow to go home so it has to be today.

Guess what? Not going to happen – not because we don’t want to sell you a business, but because seeing a business on whim is utterly impossible. It can not be done. When we tell this buyer no, they inevitably get angry. Angry because they want to see a business and they would be spending a lot of money. Angry because today they have nothing to do and it fits into their schedule so it should also fit into ours.

Here’s the reality. That angry whim buyer obviously planned their trip. They bought plane tickets. They packed bags. They took leave from work. They arranged pet sitters. They reserved a rental car.

If this buyer really wanted to see businesses while they were here – they absolutely could have if they had just planned ahead like they did with all the rest of their travel arrangements.

Why can’t I just go see a business when I feel like it? Why do I have to plan ahead?

Operating businesses protect themselves while they are for sale by maintaining a shield of confidentiality about that for-sale status. No one except the seller, the broker and buyers who have signed the appropriate non-disclosure agreements know that the business is for sale. This keeps the staff from quitting en masse. It keeps vendors and clients from canceling contracts. Most people think that a business for sale is a business in trouble (hardly ever true), so it is vital that the for-sale status stays need-to-know.

What does that mean for a business buyer who wants to see a business? The process usually goes something like this:

You talk to a business broker about your goals for business ownership, the amount of capital you’d like to spend and about the types of industries you are interested in. They help you narrow down the list of all potential businesses for sale to just those that would be what you are looking for. You then sign NDAs for those businesses and get a cursory look at some financial information as well as the name and location of the business. That information is used to narrow your list further to just those businesses that you really like. Your broker will then contact the seller’s broker and set up a conference call between you and the seller. If you are still interested in the business after your initial conference call with the seller, you can set up a walk through of the business location. This visit will have to take place when the business is closed so no employees or customers will be around. It will also have to occur when you, your broker, the seller’s broker and the seller themselves are available.

It should be obvious that this process can’t happen in a couple of hours. It just can’t.

Here’s what you can do instead. When you start planning your trip – plan to see some businesses. Talk to a broker. Sign the NDAs. Talk with some sellers. Coordinate a few business visits long before you step on the plane. Using the process to your advantage will keep you from wasting your time looking at businesses that never would have worked for you in the first place. Start planning today.

Are you thinking about traveling to see businesses and want to know more about the process that’s required? Would you like to know what businesses are for sale in a particular area? 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

1 Comment »

Business Buyer? Why You Need The Entrepreneur Mindset

Posted in Become a Business Owner, Buyers Articles

Published April 5, 2021

If you are ready to jump into business ownership you may have a type of business in mind, you may have the capital raised for the purchase and you may even have a business broker searching for the perfect opportunity – but what you may not have is the right business mindset to truly succeed as an entrepreneur.

Here are a few of the ways you can change your mindset to set yourself up for success:

Actions speak louder than words.

Business plans are great, but you need to keep from spending all of your time focused on an idealistic plan. In most small businesses, the way you hope things will go and the way they actually go are two completely different things. Great entrepreneurs are good at adapting to their continually changing environment – and they don’t spend all of their time writing plans. It’s just better to do what needs to be done.

Don’t blow all of your money up front.

You might have what feels like a lot of capital the day you get the keys to your business, but it is really important to remember that it might take a while – think months – to get the business turning the kind of profit you will need to be in the black.

Don’t make a rookie mistake and try to change or renovate too much right out of the gate. Many first-time buyers walk into a functioning business and gut the place, spending a small fortune on aesthetics so the business can look the way they want it to right away. The most successful business owners wait to make changes until they are sure what (if anything) needs to be changed. Spend a few months learning why the business runs the way it does and why the previous owner did things the way they did. Use their experience to your advantage and save your capital for what really needs to be done – later.

Your customers are absolutely everything.

The most important rule in entrepreneurship is the customer comes first – always. Unless you are driving your clients around to appointments – it really doesn’t matter what kind of car you drive. If you bought a bar, then it doesn’t matter what the furniture in your office looks like. Only spend money on things customers see and touch, thereby investing all of your energy back into your business. The more you invest in your business, the more likely you are to get a return for your money and time.

This customer-first approach covers your goods and services too. If you have grandma’s meatball recipe on the menu, but customer feedback says they’re gross – then it doesn’t matter how much you like them. They have to go.

The message here is whatever your idealistic hopes are for owning your own business, a good dose of patience and the ability to pivot when things inevitably go sideways will serve you far better than your plans. Keep the needs of your customers at the top of your priorities and be smart with the ways that you invest in your new business venture.

Are you thinking about buying a business but have questions about what business ownership would be like? Would you like to know how much capital you would need to buy a business? Please leave us a comment or question 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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The Realistic Must-Have List: Thoughts For Business Buyers

Posted in Become a Business Owner, Buyers Articles

Published March 29, 2021

If you’ve ever watched one of the myriad of home renovation shows, you understand the importance of staying realistic with your must-have’s in a home when you are looking to buy. You can’t expect perfection when you are looking for a deal.

A similar truth rings true if you are looking at buying a business. Many new prospective business buyers come to the market with an eternally long list of what their ideal business must have before they buy. They literally want the perfect business. Guess what? The perfect business doesn’t exist.

We’ve seen some interesting perfection-seeking, must-have lists – like only wanting a business where the owner is retiring, the business is at least 20 years old, the landlord is willing to lower the rent and it must be able to run with an absentee owner – all for less than $50,000. Realistic? Definitely not.

The problem with this approach is the longer your must-have list, the less likely you are to find a business. You may end up in buyer purgatory forever, always searching for the “perfect” business.

Your first step towards successfully finding a business is letting go of the must-have’s and instead focusing on the goals you would like to achieve as a business owner. What are you looking for – a chance to be your own boss, more financial freedom, the opportunity to follow a passion? Ask yourself these questions first, then look for a business that will fit with your goals.

Your next step after defining your goals is to decide what issues you will be willing to deal with and which will be deal breakers once you find a business. All businesses are inherently complex and all businesses have issues of one kind or another – so be ready to make decisions on what’s do-able and what’s a deal-breaker.

Some examples of do-able issues might be a restaurant with falling numbers but an ineffective and disgruntled waitstaff that could easily be replaced, thereby turning customer service reviews around. Or perhaps a retail business that has zero online presence and no marketing plan to speak of that you could make profitable with some marketing savvy and a good website.

A deal-breaker issue, on the other hand, might be finding out during due diligence that you would be inheriting an $80,000 debt that the seller tried to conceal.

While searching for a business, remember that the past records of a business are just that, they’re the past, and the future of the business and what you could do with it are up for grabs. Just like in the home renovation shows, it’s not the house at the beginning of the renovation that counts, it’s the finished product that matters.

A creative buyer with some decent marketing know-how can turn around a less-than-ideal business in short order if they have a decent plan in place. By applying your personal strengths and experiences you can make many businesses fit with the goal you would like to achieve.

Just remember that there is no such thing as the perfect business, so keep an open mind and keep your must-have list short.

Are you looking at buying a business, but you can’t seem to find one that fits with your goals? Do you think your must-have list might be too long? Do you have questions about what issues are do-able and what issues are deal-breakers? Ask us! 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

No Comments »

Buyer Discretion: Why You Need To Prevent Catastrophe

Posted in Become a Business Owner, Buyers Articles

Published March 22, 2021

When new buyers enter the business market, there’s a common frustration – confidentiality.

You are about to spend a very large amount of money – so you will obviously want to know everything about the businesses you are considering, and you want to know it now.

The problem here? Business sales don’t quite work that way. There’s a need for discretion and confidentiality.

Why does everything have to be such a big secret?

Confidentiality has to stay in place in order to protect the business. If employees, vendors, clients or the competition find out a business is for sale, it can mean big problems for the bottom line. Employees quit, vendors cancel contracts, clients go elsewhere and the competition can move in for the kill.

Why should a buyer care about confidentiality?

One of the reasons buyers have an issue with confidentiality is it doesn’t seem like something benefits them – it only seems to be in place to protect a seller and the business itself. It’s not. Think of confidentiality this way, you don’t want the business you buy to be in complete turmoil the day you take over, so keeping a tight lid on the for-sale status will be key.

The best way to illustrate why confidentiality is such a massive deal is with an example of what can happen if confidentiality is breached.

A buyer is very interested in a listing for a small restaurant in a downtown location. The buyer gets in contact with the listing broker and signs the necessary non-disclosure agreement. The listing broker then reviews the “rules of the road” – the buyer may not speak to employees, share any financial information, or tell anyone that the business is for sale. The buyer agrees. Since he now knows the name and physical location of the business, he goes in for lunch and asks to speak with the manager. He asks the manager why she thinks the business is up for sale and then asks for a tour of the kitchen. The manager, a key employee, had no idea that the business was on the market. She immediately runs into the kitchen to ask the head chef if he knew anything about the business being up for sale, which, of course, he did not. In the panic this buyer has now caused, both the manager and the head chef quit to find more stable work. Now the business has lost it’s two most important employees and has been left in a seriously vulnerable position.

As you can see, the confidentiality of a business sale is extremely important. This buyer seriously damaged the seller’s business, and he didn’t have to do very much to cause all of this upheaval.

As a buyer, you will be expected to maintain confidentiality all the way up to the closing table. This is critical to the survival of the business and to the sale. The non-disclosure agreements you sign are there for a reason and are absolutely enforceable. If you disclose the business sale to an inappropriate party, you can face legal repercussions.

These rules are in place to protect the businesses you are trying to buy. Do your future business favor and keep confidentiality in place!

Are you a business buyer who has questions about confidentiality in the business market? Ask us! Leave a comment or question here, and we will be happy to address any questions you have.

Michael Monnot

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

www.InfinityBusinessBrokers.com

No Comments »

Why You Have To Go With The Flow – The Importance Of Transaction Protections

Posted in Buyers Articles

Published March 15, 2021

If you are in the early stages of buying a business you will notice that the process of buying a business is unlike the process to buy anything else. You have to sign non-disclosure agreements. You have to provide financial statements. You have to disclose your full name and physical home address – all before you can even find out what the name of any business is. If it seems a little intrusive, you aren’t alone in feeling that way. Many first-time business buyers feel that way too. We get it, but your disclosure of a very small amount of information is about to give you access to potentially business-ending information. It’s more than a fair trade off.

What’s business ending about finding out the name of a business you might want to buy?

Existing businesses depend on the confidentiality of the business transaction process to protect themselves.

From what? Damaging misconceptions.

When the average person hears that a business is for sale, they automatically assume that said business is for sale because something is catastrophically wrong. Why would anyone sell a great business, right? Now imagine what the staff think. Am I about to be out of a job? Is the place I work going out of business? If we get a new owner will they fire everyone?

A business who has their for-sale status disclosed to the wrong people by a breach of confidentiality may face devastating consequences. The entire staff can quit en-masse. Regular clientele can find somewhere else to go. Vendors can cancel key contracts. Competitors can move in for the kill.

To protect businesses from these consequences everyone in a business transaction must agree to hold the for-sale status of the business secret for the duration of the business transaction. As a buyer, you will be required to sign non-disclosure agreements (NDAs) that say this, and carry with them legal repercussions if you breach confidentiality. A non-disclosure agreement gets tied to an individual by using that person’s legal name and physical address. There might be 10 guys named John Smith in your town, but there’s only one John Smith who lives at 123 Main Street.

After you sign the NDA, you will be given access to not only the name and location of the business – you will also be given access to information like proprietary business practices, tax returns, contracts, employee records and the like. A seller is trusting you with a huge amount of potentially damaging information (if it fell into the wrong hands), so divulging who you are and where you live is more than a fair trade off.

In some cases a seller or the commercial landlord will require financial statements as well. These are used to prove that you have the financial means to buy the business and you aren’t just kicking tires. Again, providing proof of financial means pales in comparison to the amount of information your cooperation with the process gives you access to.

It can be tempting to fight transaction protections by trying to alter NDAs or by refusing to provide financial disclosures. Don’t. NDAs are standard in this industry and can not be changed. Refusing to sign one or demanding changes before you do will result in business brokers and business sellers refusing to work with you. The same goes for those who want to be cagey about providing financial disclosures. Refusing to cooperate with the process means your business transaction is over. Period. The business transaction process exists to protect the businesses that are changing hands, and every step in that process is a tried and true way to keep everyone in the deal protected.

You wouldn’t want a business you hope to buy destroyed by the careless buyer who came before you, or by a future buyer when you decide to sell – so everyone has to play along in order for the business transaction process to work as intended. Be prepared to cooperate, and the process will work for everyone – including you.

Are you looking at businesses and want to know more about the transaction process? Do you have questions about the NDA? 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 »

Do I Have Enough Money To Buy A Business? The Answer Might Surprise You

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

Published March 8, 2021

Do you have enough? When you’re considering buying your first business, this is probably the first question you will ask yourself. Why? There’s an unhelpful preconceived notion that you need millions and millions to buy a successful business. Guess what? You don’t.

Business prices can vary greatly, even within the same industry. If you are interested in buying a restaurant, for instance, you could get a small neighborhood sandwich shop for $50,000 – or you could shoot for a large waterfront steakhouse that could run you $500,000.

How are businesses priced?

Businesses are priced based on a few factors – namely how much money they earn (cash flow), the value of things like vehicles/equipment/furnishings and the value of the current inventory. There are other factors that also play into pricing, like how much comparable businesses have recently sold for, how many years the business has been open – the list goes on. When you first enter the business market it is a great idea to use the advice of an experienced and qualified business broker because they will be able to both explain how a particular business has been priced and also advise you on whether the business is potentially worth what the sellers are asking.

How do I actually buy a business?

In the business world cash is king. Most first-time buyers, however, are not coming to the market with large amounts of cash to spend. If you don’t have a ton of cash available then a very large manufacturing business that lists in the millions is probably not for you. There are, however, smaller businesses that can run under $30,000. What you end up spending will depend on what type and size of business would fit with your goals and also what you can afford.

What if I have almost no cash available, can’t I just get financing? Yes and no. Buying a business is nothing like buying a car. You can’t walk in with no money down and walk out with the keys. There are a few financing options available to business buyers, but it is important to understand from the start that you will need a fair down payment for any business with any financing option. No one is going to finance 100% of a business purchase.

There are a few traditional lending options – like bank loans – but for the most part you will have an incredibly hard time getting any bank to finance a small business purchase.

The Small Business Administration (SBA) has some funding available, but much like traditional lending these loans are often hard to get. A business must meet a rather stringent set of criteria and then the buyer themselves will also have to meet SBA’s buyer criteria.

The last and most common financing option is something called seller financing. In this scenario the seller finances a portion of the purchase price to be paid back by the buyer over time. If you are looking to this option then you as a buyer will have to bring some capital to the table in the form of a down payment. For a seller a large down payment shows good faith that a buyer is serious about getting to a closing table. For buyers, a seller who is willing to hold a note like this is a good sign. It means the seller has confidence in the future of the business.

No matter how you end up buying a business – be it cash or financing – the most important point is to have realistic expectations and seek some sound advice.

When you first talk to your business broker, be honest about the amount of capital you will actually be able to bring to the table. Dishonesty here will eventually come out as you will be asked to prove how much capital you have as a deal progresses. Also be honest with your broker about what you are looking to get out of buying a business – if you just want to be your own boss, if you want a flexible schedule or if you want to follow a passion you’ve always had. With the amount of money you have and the goals you have in mind an experienced broker should be able to find you businesses that will meet with both what you have and what you need.

Are you a first-time buyer who has more questions about how businesses are priced? Would you like to know how much of a down payment you would need? Please ask us! Leave a 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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