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The First Impression – Preparing The Physical Location Of Your Business For Sale

Posted in Sellers Articles

Published July 20, 2023

First impressions matter. When it comes to selling your business, the optics and condition of your physical location will play a pivotal role in making a lasting impression on potential buyers. If you are serious about selling your business you need to ensure that your physical location looks its best.

Here are some thoughts on how to get it ready:

The first step in preparing your physical location is to ensure it is clean, well-maintained and aesthetically pleasing. Consider investing in a thorough deep cleaning of the premises – including floors, walls, windows and all equipment. Address any necessary repairs such as leaky faucets, broken lights or chipped paint. A well-kept location reflects positively on the overall state of your business. Why? If you’ve let aesthetic issues slide it can make buyers wonder what else you’ve ignored.

You might be a horizontal filer and know where everything is in the piles of junk littering the corners of your business – but when the time comes to sell you have to understand that a cluttered and disorganized space can be a major turn-off for potential buyers. Streamline your physical location by decluttering areas, removing unnecessary items and organizing storage spaces.

Take some time before your business is listed to create a comprehensive inventory of all assets and equipment included in the sale. Provide detailed information about their condition, age and any warranties or service agreements. This documentation gives buyers a clear understanding of the tangible assets they will acquire, and this mental inventory of what you’re selling can help you see what needs cleaning and/or maintenance before buyers come through.

Don’t forget that it’s not just the inside of the business that matters. Curb appeal can significantly impact a potential buyer’s perception of your business. Invest in exterior improvements like landscaping, fresh paint and well-maintained signage. A visually appealing exterior has the same effect that a well-maintained interior does – it tells buyers that you take good care of all aspects of your business.

Getting your business’s physical location ready for sale requires careful attention to detail and a focus on presenting the space in its best light. A clean, organized and visually appealing space enhances the overall perception of your business and its potential.

Have you considered selling your business and want advice on what you need to fix or replace before you list your business for sale? Do you have questions about what types of feedback buyers give after seeing physical locations for the first time? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

The True Measure Of Success: Emphasizing Cash Flow Over Aesthetics When Buying A Business

Published July 17, 2023

In the world of business sales, it’s all too common for prospective buyers to be swayed by how a business looks. The allure of aesthetically pleasing interiors, new equipment or fancy technology can blind them to the crucial factor that truly defines a business’s success: cash flow.

Cash flow is the lifeblood of any business. It represents the net amount of money moving in and out of a business, essentially reflecting its financial health. A small café with a newly renovated space or a manufacturing business that just invested in all new equipment might look fantastic from the outside – but without consistent, positive cash flow it risks becoming unsustainable. Cash flow ensures that operational expenses, employee salaries and other crucial financial obligations are met. Neglecting to focus on cash flow during the business purchase process can lead to severe repercussions down the road.

One of the main reasons buyers get lured by aesthetics is the misconception that a visually appealing business automatically translates into profitability. While aesthetics can play a role in attracting customers and enhancing brand image, they do not guarantee financial success. A beautiful storefront might draw initial interest, but if it doesn’t convert visitors into paying customers and generate sustainable revenue – it’s merely a façade.

On the other hand, a business that might not have the most captivating exterior or is full of older equipment could be backed by solid fundamentals and robust cash flow. This means the company is efficiently converting its sales into profit, reinvesting in growth and reducing debt – all of which contribute to long-term success.

Focusing on cash flow during the purchase process enables buyers to make informed decisions based on concrete financial data rather than deciding on a business because you like the paint colors and furniture. Conducting a thorough cash flow analysis helps determine whether the business has consistent revenue streams, assesses its ability to weather economic downturns and reveals potential areas for improvement. This is why it is far more important to examine the financial records than it is to do a physical walk-through of the location.

Savvy business buyers understand the importance of looking beyond surface-level charm and instead place emphasis on the financial stability of the business.

Are you looking at businesses to buy and want to know how to determine the cash flow a business is actually generating? Would you like to know more about how to see past a shiny exterior and make a decision based on financial health instead? Ask us! Leave any questions or comments here and we would be happy to help.

Michael Monnot

Selling Your Business? The Benefits Of Offering Seller Financing

Posted in Sellers Articles

Published July 13, 2023

As a small business seller you might find that attracting potential buyers can be a challenging task, especially in a competitive market. Offering seller financing can be a strategic move that sets your business apart from the rest.

Why should I offer seller financing?

Seller financing opens the door to a larger pool of prospective buyers. Many aspiring entrepreneurs, especially those with limited access to traditional bank loans or significant upfront capital, often seek businesses that offer financing. By providing this option, you can attract buyers who may otherwise be unable to make an all-cash purchase.

Offering seller financing also signals your confidence in the long-term viability and potential of your business. This vote of confidence can instill trust in buyers, making them more comfortable with their investment decision. Your willingness to finance a portion of the purchase price speaks volumes about the business’s stability and growth prospects.

Additionally, seller financing provides sellers with an advantage during negotiations. You can potentially command a higher selling price or better terms by offering financing. Buyers may be willing to pay a premium for the convenience of structured payments over time, which can work in your favor when closing the deal. Another bonus? As the buyer makes regular payments you receive consistent cash flow, which can be particularly beneficial if you plan to retire or invest in other ventures. This passive income can provide a safety net and financial stability after the business transfer.

Offering seller financing can be a savvy move for small business sellers seeking to attract buyers and secure a favorable deal. This arrangement not only expands the pool of potential buyers but also demonstrates your belief in the business’s potential and provides you with a steady income stream. Ultimately, embracing this flexible approach can empower the success of your business sale while fostering a positive and productive relationship with the new owner.

Are you thinking about selling your business and hadn’t considered offering seller financing? Would you like to know more about what a typical seller financed deal looks like? Ask us! Feel free to leave any questions or comments and we would be happy to help.

Michael Monnot

Business Buyer? How To Make Sense Of Add-Backs

Published July 10, 2023

Small businesses are complex, and this is especially true when trying to determine whether or not a business is listed for a fair price.

Taking a cursory glance at a tax return or a profit and loss statement can leave you scratching your head when comparing what you see with the listing price. How did the sellers get to that number?

The value of a business comes from it’s cash flow, meaning an operating business has value for a buyer because it generates money. This money isn’t all just cash, however, as an owner benefits from their business in a number of ways. For instance, many small business owners pay for personal expenses as part of their business to minimize their tax liability.

These owner benefits that are funneled through a business can make determining the value to a buyer a bit complicated. To help with clearing up any confusion there is a metric used to determine the value of a small business called Seller’s Discretionary Earnings, or SDE.

SDE simply means that you take anything personal that an owner gets from their business or anything that was a one-time expense (something a buyer wouldn’t have to repeat or worry about) – and you add that amount back into what the business makes so you can determine what the cash flow actually is.

What kinds of expenses get added back?

Discretionary expenses, like paying for a car or cell phone through the business. Think of these like perks that a buyer might not necessarily take, so that expense is added back in to show a buyer what the numbers look like without the added perks taken out.

Extraordinary expenses, like a very high salary paid to a family member who works in the business – a family member who would probably not be staying on once the business is sold. The amount of this salary that is above the industry norm would be added back into the business to normalize the payroll numbers. This way a new owner can see what the cash flow looks like with staff who only take a standard salary.

Non-Recurring expenses, like the cost of repairing water damage from a broken pipe. The new owner wouldn’t need to pay for something like this continually, so the one-time expense is added back in.

Non-Cash expenses, like depreciation. The tangible assets a business has, like the equipment or vehicles, will lose value over time. Although not the only factor in depreciation, you can think of this add-back as something related to what the business writes off for tax purposes.

Once all of these add-backs have been “added back”, you will be able to see the cash flow a business generates. This clearer picture will allow a prospective buyer to decide if a listing price is fair or not.

Still confused? Your business broker is there to help you untangle the parts of the small business world that are inherently complicated – like add-backs and listing prices. Talk to your broker if you think a listing price seems crazy or if you don’t agree with what was added back. They can make sense of the numbers – so you can make an informed choice about how much you would be willing to pay for a particular business.

Do you have more questions about add-backs? Would you like to know how sellers typically come up with listing prices? Ask us! Leave any questions or comments here and we would be happy to help.

Michael Monnot

Navigating the Storm: How Small Business Sellers Can Handle Difficult Buyer Questions

Posted in Sellers Articles

Published July 6, 2023

Selling your business might seem daunting, but it doesn’t have to be. With a bit of preparation you can face anything – even challenging questions from potential buyers.

Handling difficult questions with confidence and transparency is essential to build trust and ensure a successful sale.

Here are some valuable tips on how small business sellers can adeptly handle tough buyer questions:

Prepare, Prepare, Prepare

Anticipate potential difficult questions from buyers and prepare thorough answers in advance. Analyze the strengths and weaknesses of your business and be ready to address any concerns. A well-prepared response demonstrates your knowledge and commitment to the business, instilling confidence in the buyer.

Honesty & Transparency

Honesty is the best policy. If a buyer asks about any shortcomings or challenges your business faces, don’t shy away from discussing them openly. Presenting an accurate and transparent picture shows that you have nothing to hide and can help build credibility with the buyer. There is no such thing as a perfect business, so issues are always part of the deal.

Focus On Positives

While addressing difficult questions, don’t forget to highlight the positives of your business. Emphasize its strengths, achievements and unique selling points. Providing a balanced view that showcases the business’s potential can help offset concerns and showcase its true value.

Listen, Listen, Listen

Listen carefully to the buyer’s questions and concerns. Avoid interrupting or becoming defensive. Active listening allows you to understand the buyer’s perspective better, and it shows that you respect their opinions and considerations.

Ask Your Broker For Help

In complex situations the advice from your business broker can be immensely valuable. They can help you navigate and prepare for challenging questions, provide expert insights and ensure that your responses align with ethical standards.

Keep Your Composure

Dealing with difficult questions can be stressful, but it’s crucial to remain calm and composed throughout the process. Avoid getting emotional or defensive, as it can create an unfavorable impression. Remember that challenging questions are a natural part of any business transaction and handling them with professionalism is key.

Give Facts

Back up your answers with concrete data, such as financial records, sales figures and market research. Providing verifiable information adds credibility to your responses and reinforces the business’s performance and potential.

Talk About Growth

Incorporate a clear vision of future growth and expansion opportunities for the business. Buyers are often interested in a company’s potential for long-term success, so demonstrating a well-thought-out growth strategy can be a major selling point.

The point here is sellers should view difficult buyer questions as opportunities to showcase their business’s strengths. By preparing thoroughly, being transparent and handling inquiries with composure sellers can build trust, encourage interest and ultimately pave the way for a successful business sale. Remember, a positive and confident approach can go a long way in securing the right buyer for your small business.

Are you getting ready to sell your business and want to know what kinds of difficult questions a buyer might ask? Would you like to know more about navigating buyer questions during negotiations? Ask us! Please feel free to leave any questions or comments – we would be happy to help.

Michael Monnot

Is This Where You Want To Live? Thoughts For Business Buyers

Posted in Buyers Articles

Published July 3, 2023

The romance of owning your own business can sometimes give a new buyer blinders about where the business actually is and what that means for the day-to-day life of the business owner and their family.

It’s essential to evaluate the local area where the business is located to determine if it aligns with the lifestyle you’re looking for and it has the amenities you need. Assessing the local area helps ensure that you not only invest in a viable business but also find a community where you want to live and thrive.

An important note here. Don’t trust the outward appearance or your preconceived notions of what a place is like. Google it. Visit. Call schools. Watch YouTube videos. Join Facebook groups to hear what people are really saying. Read the local news. You get the idea.

Here’s some things to consider when looking at not only where you want to work – but where you want to live:

Evaluate the local area’s lifestyle and determine if it suits you, your family and your goals. Consider factors such as climate, proximity to amenities, recreational activities, cultural attractions and community values. Ensure that the local area offers the quality of life you desire, as you will be spending a significant amount of time in this community.

Research the cost of living in the local area to understand its affordability. Compare housing costs, taxes, transportation expense, and other living expenses with your budget and financial capabilities. Ensure that the cost of living is sustainable and aligns with your income potential from the business you plan to buy.

Evaluate the local area’s accessibility and infrastructure. Consider proximity to transportation hubs, major highways, airports and public transportation. Assess the quality of healthcare facilities, schools and other essential infrastructure that may impact your lifestyle and the business’s success.

Consider the safety and security of the local area. Research crime rates, the effectiveness of local law enforcement and any other relevant safety measures. A safe and secure environment is crucial for your personal well-being, the well-being of your family and the success of your business.

Evaluate the level of community engagement and support in the local area. Look for signs of a vibrant community that values local businesses and encourages entrepreneurship. A supportive community can provide networking opportunities, word-of-mouth marketing and a customer base that appreciates local establishments.

It could not be more important to thoroughly research the local area before you buy a business. Your life outside of your business needs consideration just like P&Ls and purchase contracts. Sit down with your family and figure out what everyone will need to be happy and then find a business in a place that will meet those goals.

Are you thinking about buying a business and hadn’t considered researching where you would actually live? Do you have questions about what businesses are currently for sale in an area you like? Ask us! Leave any questions or comments and we would be happy to help.

Michael Monnot

Buying A Business? What To Expect When Headed For The Closing Table

Published June 26, 2023

If you think you might be ready to take the entrepreneurial leap, but don’t have a genius start-up idea you can work on in your garage – you don’t need one! Existing businesses get bought and sold everyday, some 500,000+ a year (a number that is on the rise as baby boomer owners enter retirement and list their businesses for sale). These existing businesses can instantly turn you into an entrepreneur, no start-up required.

If you’ve always wanted to be your own boss and think buying an existing business might be for you – the process is fairly straightforward. You can read more about the initial steps you’ll take here – but the last steps you take before the day you get handed the keys can be some of the most important.

Here’s a few to consider:

Complete a thorough and final round of due diligence on the information provided by the seller. Review all relevant documents, contracts, financial records and legal obligations to ensure there are no surprises or undisclosed issues. This step is crucial to confirm the accuracy of the information and ensure that the business is in the expected condition.

Work closely with your business broker and business transaction attorney to negotiate and finalize the purchase agreement/contract. This document outlines the terms and conditions of the sale, including the purchase price, payment terms, assets included and any contingencies. Ensure that the agreement reflects the agreed-upon terms and protects your interests as the buyer.

Identify and obtain any necessary approvals, permits or licenses required to operate the business legally. This may include licenses for specific industries or local permits. Talk to your business broker about what you’ll need from state and/or local regulatory agencies to ensure compliance with all legal requirements. You can read more about that here.

Develop a comprehensive transition plan with the seller to ensure a smooth handover of the business operations. Identify key employees involved in the transition process and communicate the plan effectively. Prepare any necessary training materials, transfer important documents and information, and ensure a seamless transfer of responsibilities. Use the entirety of the training period outlined in your purchase contract to your advantage and learn everything you possibly can from your seller.

Schedule a final walkthrough of the business premises with your broker to assess its condition and ensure that all assets included in the sale are in the expected state. Check that all equipment, inventory and fixtures are accounted for and in working order. Address any outstanding issues or discrepancies before the closing.

The last steps before reaching the closing table are crucial in finalizing the purchase of a small business. Completing due diligence, finalizing the purchase agreement, obtaining approvals and licenses, preparing for the transition and conducting a final walkthrough are all essential tasks. By carefully completing these steps, buyers can mitigate risks, address any outstanding issues and set the stage for a successful transition into their new business.

Are you new to the business buying process and have questions about these pre-closing tasks? Would you like to know more about what the transaction process looks like for the type of business you are interested in buying? Ask us! Feel free to leave questions or comments here and we would be happy to help!

Michael Monnot

Want To Sell Your Business? Why You Can’t Mentally Check Out Just Yet

Posted in Sellers Articles

Published June 22, 2023

You are ready for a new chapter in life, so you’ve listed your business for sale. Your thoughts are on a much needed vacation, sipping drinks in a beach chair – but there are good reasons to focus on your business now more than ever.

The biggest reasons?

It can take a long time to sell your business.

It typically takes 9 to 12 months to sell. How much damage can you do by mentally checking out for that long? Probably a lot. Sellers who mentally check out months before they’ve even found a buyer can do real damage to the bottom line. A sudden downturn in sales, losing a major account or falling profits can cause buyers to decrease their valuation of the business when the time comes to negotiate a price. A business with a disconnected seller tells a buyer that no one cares about the stability or future of the business – so why should they?

It might not sell.

It is an unfortunate truth of the business market that some businesses just never sell. It might be because of a lofty listing price that scares buyers off, it might be because the business is too niche, it could be because a seller has a change of heart or a change of circumstance that causes them to pull the business off the market – or it might even be because a seller has let the business slide to train-wreck levels. Whatever the reason for languishing on the market, once you’ve decided not to sell and return to ownership for the foreseeable future, you don’t want to leave yourself with a mess. You should always assume, whether you’re selling or not, that you will always be the owner of the business and maintain full responsibility until the day you hand over the keys.

The moral of the story? Even if you are completely burned out – you need to see your business through to the closing table. If you can push through the sale process while keeping your business in good shape, you will get a far better return on your investment than if you didn’t.

Are you a seller who feels like you need to sell now? Do you want to know how long it would take to get from listing to closing? Ask us! Leave us a comment or question here and we would be happy to help.

Michael Monnot

4 Ways: How To Finance The Purchase Of A Business

Published June 19, 2023

Coming up with a brand new business idea is a big challenge. You have to figure out a concept, find a location, come up with operating procedures, hire and train a staff, build out your space – the list is a long one.

If you’ve ever wanted to own your own business there’s a way to do so without having to start at ground level. You can buy an existing business instead – one that has a proven location, concept and track record.

If this sounds like it might be the right path for you, here’s your next question.

How are you going to pay for it?

In the small business world there are essentially 4 ways to finance the purchase of a business. Let’s take a look at your options:

Seller Financing

This one is probably the most common. A buyer comes up with a substantial down payment and then the seller of the business finances the rest. This option is popular because small business funding can be difficult to get from a traditional lending institutions like a bank, so sellers will offer creative financing to open up the pool of buyers for their business. This is also popular among buyers because a seller who is willing to keep some skin in the game tells you volumes about how they view the future profitability of their business. They don’t get paid unless you succeed. A few caveats for this financing option. You will need to bring a large down payment, 10 or 15% isn’t going to cut it. Also, if you do end up defaulting on this loan the seller will get the business back.

SBA Loan

The Small Business Association (SBA) does offer loans in the right situation to people buying a small business. There will be a fair share of bureaucracy with this financing option, as well as certain metrics both the buyer and the business itself will have to meet in order for the loan to happen.

Investor/Family Funds

In some situations a buyer is able to procure funds from loans made by family, friends or investors. This option should include a contract or written agreement by all parties that spells out every aspect of the loan – how it will be paid back, what metrics are necessary, how one or more parties can be bought out of the agreement should the need arise, etc.

Your Own Cash

Lastly, you can always use your own cash to fund the purchase of a business. Perhaps you have a decent amount of money in savings, maybe you’re considering refinancing your home or pulling funds out of investment accounts. This option will alleviate you from owing money to others but must be considered carefully if you are going to be investing all of your available cash into the purchase of a business.

If one or more of these financing options seem doable for you, the next step you should take is to have a conversation with an experienced and qualified business broker. They will be able to talk you through the options available to you and help you decide which option will best meet your goals for business ownership.

Have you always wanted to own your own business but weren’t sure how you would fund such an endeavor? Would you like to know more about how seller financing works? Do you have questions about the process required for a loan from the SBA? Ask us! Leave any questions or comments here, we would be happy to help.

Michael Monnot