8 Common Mistakes Business Sellers Make

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8 Common Mistakes Business Sellers Make

January 4th, 2021 Terry Monroe Leave a comment

All business owners think about selling their business at one time or another. However, for the ones who decide to go forward and sell, there are certain points that need to be addressed if they want to have a successful transaction and get the most money for their business.

After selling over 800 businesses, I decided to list eight common mistakes owners make when selling their business:

1. Trying to sell it yourself. Business owners usually are not objective about their business. Even if you have the financial skills, you’ll have a tendency to overestimate the value. And you are not expected to have the financial skills to be objective in the valuing of your own business. Instead, you are a successful business owner, which is an art in itself. The selling of a business is the combination of both an art and a science, and it is performed by individuals who do this full-time as their profession. You do what you do best, and let a professional intermediary do what they do best.

There is a reason pro athletes and actors have agents – because they get more money and better terms when they hire someone to negotiate for them. Likewise, you simply won’t get as much value for your business trying to sell it yourself and learn on the job. Attempting to sell your own business will devour your time. You know how to run your business, but this is no time to learn how to be an investment banker or business broker.

2. You are too sensitive about your business. You will take comments made by a buyer personally and perhaps kill the deal. Nobody likes to hear they have an ugly baby, and the same is true when you are selling your business. Any negative comments about your business to you will be taken personally regardless of how hardened you may think you are. The solution is to get an intermediary to soften the blow and translate the buyer’s comments into requests that will not be taken personally.

3. You don’t know how to arrive at fair market value. Owners who are unrealistic about the value of their business are the biggest reason why deals fall through. Get the facts and the reality of what businesses like yours are selling for in the current market, and never believe anything you read in the trade magazines as the gospel regarding valuations.

4. You don’t know how to recognize a qualified buyer. Different businesses require different kinds of buyers, and different buyers will pay different amounts for a business. You need to know which buyers are paying the most in today’s market because buyers change with the market.

5. You probably don’t know where to look for the right buyer. Finding the right buyer for your business who will pay top dollar isn’t as easy as running an ad in a trade magazine or newspaper and seeing who contacts you. As a seller, you want to know who really has the money and whether they are serious. Are they cherry pickers or making low-ball offers? Or do they try to claw back on an offer and use the old bait-and-switch technique? Remember, time is money, and buyers are generally working on your time and your money.

6. You fail to realize that selling a business is a process, not an event. Selling a business involves a structured process that takes time – generally between six to 12 months from conception to closing. It is a very detailed process that not all sellers are up to accomplishing without guidance from a trained professional who has performed this process many times before.

7. You have to assemble the right team to get the job done. Just as in sports, if a seller doesn’t have the right team of players in the game, he will either get defeated or hurt in some way. What is the right team? An attorney who has experience in business transactions and understands the sale of a business to a buyer and not to one’s lifelong golfing buddy. An accountant who understands the tax system and is not afraid to give good tax advice, knowing there is a possibility they will lose your account and is looking out for your best interest. And an experienced intermediary who has working knowledge of your industry.

8. You aren’t committed to selling. Selling a business is a lot of hard work. People don’t realize how much work it is to assemble all of the data that is needed by a buyer to get a business sold. A lot of transactions will fall apart because the seller is either not committed to the process or does not have the mental stamina to continue. The solution is to get help from a seasoned intermediary who will coach from the beginning to the end and help you to reap the rewards for all of your many hard years of work.

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Terry Monroe (www.terrymonroe.com) is founder and president of American Business Brokers & Advisors (ABBA) and author of Hidden Wealth: The Secret to Getting Top Dollar for Your Business with ForbesBooks. Monroe has owned and operated more than 40 different businesses and sold in excess of 800 businesses. As president of ABBA, which he founded in 1999, he serves as an advisor to business buyers and sellers throughout the nation. As an expert source he has been written about and featured in The Wall Street Journal, Entrepreneur magazine, CNN Money, USA Today, CEOWORLD, and Forbes.

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Why A Vaccine For COVID-19 Won’t Restore Small Businesses Overnight

December 17th, 2020 Terry Monroe Leave a comment

The vaccine for the COVID-19 virus recently began shipment. The Wall Street Journal states it will take until sometime in March of 2021 to vaccinate the first 100 million individuals with the highest priority of getting the vaccine. That would leave well over 200 million Americans still in need of the vaccine as we head into spring.

The stock market is doing very well as it hovers around 30,000 – an unbelievable achievement never seen before, even though millions of people have lost their jobs and people continue to lose their jobs on a daily basis. The stock market is based on the theory of expectation, and what it is telling us is that with a vaccine, the economy will begin to turn around and will be much better going forward.

But let’s look at this through the eyes of small businesses.

Outside of government, companies with less than $7 million in sales and fewer than 500 employees are widely considered small businesses by the U.S. Small Business Administration. And the expectation for small businesses to return to what we considered normal pre-pandemic is not going to happen anytime soon.

Here’s why. Multiple states have banned indoor dining at what remaining restaurants are still open. As of Dec. 1, nearly 17% of U.S. restaurants were “closed permanently or long-term,” according to a study by the National Restaurant Association. That percentage amounts to over 110,000 service-industry businesses across the country.

The last known numbers reported at the end of September for businesses in total that had closed were approximately 170,000. And since that time, the total has possibly exceeded 200,000. It is hard to determine how many people have been affected. In November 2020, the national unemployment level of the United States stood at about 10.74 million unemployed persons, which equates to a little over 10%. However, this number only tracks the number of people who are unemployed. It doesn’t record the people who are not drawing unemployment benefits and are out of work. So, in reality, the number is larger than the 10.74 million.

With businesses closing and laying people off, no jobs for people to replace what they lost, and no income for the owners of the businesses, vaccine or no vaccine there is not going to be anyone working to turn the economy around. It will take most of 2021 to make the vaccine available to the millions of people who will want it, but many of the unemployed still will have no work to go to after they get the vaccine and the economy continues to sit.

The economists tell us there will be a surge in business once a vaccine has been made available and administered to the public, but the numbers tell us differently. And here is the biggest kicker of all that the economists have not figured into the equation: People’s habits have changed over the past year.

People are not buying as many clothes as they used to because they have nowhere to go. There is little dining, virtually no entertainment, and no gatherings, so there is no need to buy new clothes. Fuel sales are down because people are not commuting to work like they used to. Any business or venue that needs a gathering of people to remain in business is either closed or ignored due to government restrictions.

It is obvious that small businesses are not going to return to pre-pandemic levels with so many businesses closed in such a short time period. We are looking at 2022 at the earliest before the idea of normalcy begins to occur. And when the economy does begin to turn around, some of our favorite businesses we used to visit will be gone. Businesses cannot survive as long as the states keep changing the rules, which creates volatility in the marketplace. Entrepreneurs and investors seek opportunities but shun regulation and volatility, which can disrupt the flow of business. We eventually will see a surge in small businesses opening, but until then small businesses are on a declining slope.

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7 Proven Tips To Buying a Business Post-Pandemic

December 10th, 2020 Terry Monroe Leave a comment

When is the right time to buy a business? It’s an important question many people ask themselves for a variety of reasons, and it becomes even more interesting when they’re considering purchasing a business after the COVID-19 pandemic ends.

That leads to a series of related questions. Such as, what types of businesses and locations will represent the best opportunities post-COVID? Which ones will pose the highest risk? Should potential new owners expect to get a decent deal, or would it be worth putting a bunch of their savings toward?

What kinds of companies have these potential owners been dreaming of during their working days? Shouldn’t it be the kind of business they could enjoy, rather than one that would run them into the ground, perhaps causing regrets and a lot of lost money?

Chances are, a lot of people will be ready to sell after the draining pandemic, and here are some tips to help you decide about buying:

1. Decide how much money you want to make. This should be the first question you should ask yourself because of the amount of money you want to make determines what kind of business you are going to buy.

2. Pursue a business you would enjoy. It is always better to be involved in a business that reflects your interests and brings you enjoyment. Ideally, your vocation will be a vacation. We don’t want to acquire a business that requires us to be behind a desk all day long when our passion is to be outdoors.

3. Make a list of all your talents. From the obvious to the forgotten ones. Don’t leave any of them out. If you are proficient at MS Word, Excel, and other computer programs, write it down. If you know how to play a musical instrument, be sure to include it on your list of talents. Take a complete inventory of things you know how to do, which will be important in your search for the business you are going to acquire.

Once I was coaching an individual who wanted to earn additional income because their job wasn’t producing enough money. After we did an inventory of their talents, we discovered that in their younger years they had managed rental properties for their dad. I suggested they start a real estate management business. They did and eventually owned and managed multiple properties, ultimately netting a six-figure income.

4. Select where you want to work. Do you want to stay in the same area where you are residing now, or are you willing to relocate? If you are not interested in relocating, then there is a possibility your opportunities will be limited, unless you decide to work on a national basis by selling products on the internet.

The famous bank robber Willy Sutton was asked, why did he rob banks? To which he replied, “That is where the money is.” The best place to own a business is where there is growth. Cities, communities, and relationships are all either living or dying because nothing stays the same. Things are either going backward or forwards. Stack the odds in your favor; go where there is growth and give the business an edge.

5. Know who you are as a potential business owner. Are you a self-starter who is disciplined, and once you start a project you finish it? Or do you perform better with a partner? I have worked with many people who, even though they were provided with a step-by-step guide for what to do, were not able to implement and complete the program themselves. But if they partnered with another individual, they completed the job. When buying an operating business, you will get not only the playbook of how things are done but employees who know the business and a business that is producing a cash flow from the day you take over.

6. Know your comfort level – out front or behind the scenes? Do you like working with the general public and servicing the general public, or are you more comfortable behind the scenes helping people via emails or telephone? If you are an introvert who feels uncomfortable talking to people in person on a daily basis, then you should not own a retail or service business that requires a lot of personal interaction. I have seen people who enjoyed being a customer in a retail business, then purchased a retail business, only to discover they didn’t like the hours involved, working with individual shoppers, or the back-office duties. They ultimately sold the business at a loss.

7. Don’t get hung up on how and where you will get the money to get started. Once you have determined how much money you want to make, what you enjoy doing, what your talents are, and where you want to live, finding the right business gets a lot easier. Now you have the checklist of wants and needs, and all you need to do is to search out businesses that are for sale.www.bizbuysell.com,www.businessesforsale.com

I have bought businesses with no money down and have started businesses with no money down. Sometimes you may have to borrow money from credit cards or bring a partner on board to provide the money while you provide the work. This is called “bootstrapping” and it is how many people get started.

Or you may want to use what we call “Love Money,” which is from family and friends. Money is not as hard to get as people think, because if the opportunity is good enough you will find the money. Money is attracted to opportunity. Especially after a pandemic. Many owners are tired of operating their businesses and are more receptive to selling out now than before. And as the saying goes, “Luck is when preparedness meets opportunity. And opportunity is always there.”

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Terry Monroe (www.terrymonroe.com), is founder and president of American Business Brokers & Advisors (ABBA) and author of Hidden Wealth: The Secret to Getting Top Dollar for Your Business with ForbesBooks. Monroe has owned and operated more than 40 different businesses and sold in excess of 800 businesses. As president of ABBA, which he founded in 1999, he serves as an advisor to business buyers and sellers throughout the nation. As an expert source he has been written about and featured in The Wall Street Journal, Entrepreneur magazine, CNN Money, USA Today, CEOWORLD, and Forbes.

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Why Buying a Small Business Now is a Bad Idea

November 25th, 2020 Terry Monroe Leave a comment

Normally, I am a proponent of buying small businesses.

The data shows they make the world go round. The U.S. Small Business Administration Office of Advocacy, which defines a small business as a firm with fewer than 500 employees, states there are over 30 million such enterprises in the U.S.

But a convergence of factors has made the economic environment less favorable to small businesses, and I would hold off on buying one at the present time. Here are a few reasons why:

Volatility. Change is everywhere. Along with the disruption caused by the COVID-19 pandemic, a change in the nation’s political leadership means there could be more regulation. The possibility of more business interruption exists. Unless you own a strong, established business in an area that has survived the first shutdown and your business is considered somewhat essential, the volatility of operating a company with an interruption in cash flow means the business may not make it.

Continuing supply-chain issues. This remains an issue nine months into the pandemic. Shelves in stores are still not fully stocked. Furniture stores and other types of businesses are waiting months to get the necessary components to build inventory. Supply-chain disruptions can affect small businesses in numerous ways: reduce revenue, cause issues with production, and inflate costs.

Changing buying habits. Some buying habits have been permanently altered, and a vaccine for COVID-19 won’t substantially change those habits. There will be more online shopping and more “contactless” shopping. Anything that involves interacting with people will be affected, especially retail.

Changing business strategies. Buying a business is about buying a cash-flow stream, but what businesses are going to be around in the next five years? Disruption in how a business operates can change its core strategy and render the business no longer viable. Think of Blockbuster Video and Netflix, or your local enclosed mall shops and no-contact shopping with Amazon.

Tightening loans. Money is probably never going to get much cheaper to borrow than what it is now, but lenders are more cautious, too. It may be easier to get a home loan for your personal residence, but getting a commercial loan to buy a business is a different ballgame, and lenders are concerned about the unknown in small businesses going forward.

The solution is to slow down and really do your homework. Research and study the marketplace. What kinds of businesses have not been affected dramatically by the pandemic? Which ones won’t have additional regulation imposed on them in the future?

There are lots of businesses to choose from, but be selective. If you find a business that meets your criteria with good cash flow and a promising future, there is a good chance you may get a discount due to the unknowns of regulation and another pandemic. Not all business owners have the luxury of taking their time to sell; some have an urgency to sell. So in that scenario, there is a good chance you could leverage the reasons I mentioned to not buy a small business. Those same reasons could get you a discount on the purchase of the business.

Timing is everything in life, and with proper due diligence and good timing, you may get yourself a good business at a good price.

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Terry Monroe (www.terrymonroe.com), is founder and president of American Business Brokers & Advisors (ABBA) and author of Hidden Wealth: The Secret to Getting Top Dollar for Your Business with ForbesBooks. Monroe has been in the business of establishing, operating, and selling businesses for more than 35 years. As president of ABBA, which he founded in 1999, he serves as an advisor to business buyers and sellers throughout the nation. As an expert source he has been written about and featured in The Wall Street Journal, Entrepreneur magazine, CNN Money, USA Today, CEOWORLD, and Forbes.

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How to Have a Profitable Business in Any Economy

October 6th, 2020 Terry Monroe Leave a comment

People start and buy businesses for many different reasons. Some people do it as an extension of their passion for a certain thing such as flowers, woodworking, machinery or serving people. Some people do it for the thrill of winning, but ultimately everyone who goes into business does it to make money.

There are thousands of books that have been written about business telling you what to do and what not to do, but ultimately making money in business is not that difficult. Listed below are five fundamentals of what it takes to have a profitable business.

Income – expenses = profit. Income is determined by how much money is generated by the business. Expenses are what is needed to operate the business. Profit is what is left over after deducting the expenses from the income. You can always increase your income, but you can only reduce your expenses so far before you don’t have enough of the basics to keep the business operating.

Sales. A lot of people don’t like to hear the word sales, because they don’t want to be in sales or affiliated with sales, but without sales there is no business. Sales is the business. The major goal of every business is to increase sales, because without sales there is no income.

Sales combined with income and expenses applies to all industries. It doesn’t matter if you are operating an exercise/yoga clinic or a computer chip manufacturer, the formula is the same. Even churches have a sales department to entice their congregation to give more. Sales is what makes the world go around.

The formula shapes your business model. Over time, with the practicing and perfecting of the sales aspect along with the income – expenses = profit formula, you will develop a business model that works. This is called a profitable business.

Make the model scalable. To add more profits, hopefully the business model you have created is scalable and you can duplicate the business model either through franchising, dealers representing your business, or the opening of additional facilities using the same model you created and perfected.

What I have explained in five steps is very simplistic on how to have a profitable business anywhere. This formula is applicable in any geographic area and to any business. Anything else beyond the sales and income – expenses = profit model is called an excuse. I was taught early on in my business career that “You can make money or you can make excuses, but you can’t make both.”

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Terry Monroe (www.terrymonroe.com) is the president and founder of American Business Brokers & Advisors. The author of four books, he most recently published Hidden Wealth: The Secret to Getting Top Dollar for Your Business, with ForbesBooks. Monroe is a professional intermediary, consultant, and market maker for privately-held companies and has been involved in the sale of more than 800 businesses. In his 35-plus years of service, he has owned and operated more than 40 different businesses. At American Business Brokers & Advisors, he serves as a consultant for business buyers and sellers throughout the nation. As an expert source he has been written about and featured in The Wall Street Journal, Entrepreneur magazine, CNN Money, USA Today, CEOWORLD, and Forbes.

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With Jobs Eliminated Daily, is Now the Right Time to Buy A Business?

September 22nd, 2020 Terry Monroe Leave a comment

The economy and job market have been on a roller coaster since the pandemic hit in the early part of 2020.

First, the stock market took a nosedive and reached some all-time lows, only to rebound to all-time highs. The same has occurred in the job market. First, we were experiencing the lowest unemployment in years, only to be followed by the highest unemployment since the Great Depression of 1929.

Presently the stock market is rising, but there is still unemployment, and daily you read about major companies that are either laying off or eliminating jobs by the thousands.

If you have lost your job and find it difficult to find another job in an area of your expertise, then you may want to consider taking control of your future and buying a business. By owning your own business, you have more control of your future. You are allowed to use the talents you were using at your old job and apply them to a vocation that will allow you more flexibility and income.

The pandemic has created chaos in all areas of our daily lives and business, but it has also created lots of opportunities, too. Remember, overall nothing has really changed. People still need to eat, shop, communicate with each other, travel, vacation, read, sleep, etc. The only thing that has changed is how we will do these things after the pandemic is over, and it will be over eventually. Our world will be different just as travel and security have changed since 9/11, but we will still continue to live and thrive, and life will go on.

Buying a business is the quickest and least risky way to get into business, because when you buy a business that is already operating with employees and customers you have a cash flow from day one. If you can’t or don’t want to buy a business, you can start a new business. And in today’s world, if you want to reduce your risk, you may want to consider buying a franchise. A franchise is a business with a proven track record in the industry of which the franchise specializes, and all you have to do is follow the business formula the franchisor provides to you.

If you are really passionate about a certain business idea or concept, then you can start your new business from scratch. Either way, whatever option you choose you will be in control of your future more so than what you would be if you were to get another job – if another job is available.

As I was taught many years ago and live by today: “If it is to be, it is up to me.” Maybe there is a business calling your name now.

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Terry Monroe (www.terrymonroe.com) is the president and founder of American Business Brokers & Advisors. The author of four books, he most recently published Hidden Wealth: The Secret to Getting Top Dollar for Your Business, with ForbesBooks. Monroe is a professional intermediary, consultant, and market maker for privately-held companies and has been involved in the sale of more than 800 businesses. In his 35-plus years of service, he has owned and operated more than 40 different businesses. At American Business Brokers & Advisors, he serves as a consultant for business buyers and sellers throughout the nation. As an expert source he has been written about and featured in The Wall Street Journal, Entrepreneur magazine, CNN Money, USA Today, CEOWORLD, and Forbes.

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3 Key Steps to Selling a Business in Good Times or Bad

July 28th, 2020 Terry Monroe Leave a comment

The COVID-19 pandemic is putting people out of work, slowing down lots of industries, and causing businesses to close. But at the same time, an uncertain chapter in America’s economic history may provide opportunities for individuals looking for a fresh start – or a soft landing.

Nearly half of small business owners in the U.S. are 65 and older, and a good number are considering selling their business rather than putting their resources and energy into bouncing back from the recession. But isn’t an economic downturn an inopportune time to sell a business?

Not necessarily, says Terry Monroe (www.terrymonroe.com), founder and president of American Business Brokers & Advisors (ABBA) and author of Hidden Wealth: The Secret to Getting Top Dollar for Your Business.

“Some think due to the current difficult times many businesses are having that they wouldn’t be able to get a reasonable sale price,” Monroe says. “And they worry that they’ll have to delay retirement for several years because of COVID-19. But the reality is, there are lots of people, including the unemployed, looking to reinvent themselves and for a chance to run their own business. Investors with plenty of money are always around looking for good opportunities.

“The baby boomers who own many of these businesses are burned out and want to get out. But small business owners in general often don’t realize all that is required to achieve a successful sale. Done the right way, selling can result in owners walking away feeling they got good value for all they put into their business.”

Monroe says owners should think about the following factors when considering putting their business on the block:

Ask yourself why. “Selling a business can initially be an emotional consideration, but one has to drill down to the reality of why they want to sell and why it would make sense,” Monroe says. “Burnout is a common reason. If it’s affecting health or company performance, it’s time to get out. Another common factor is the inability to expand when necessary – the owner doesn’t want to incur the added debt relative to their age.” Other reasons owners decide to get out, he says, include lack of a family succession plan, too much disruption in the particular industry, and hitting a wall in terms of profitability.

Put together a professional team. “The selling process is very stressful,” Monroe says. “You can manage that by putting together a team of professionals who will guide you through it.” The team should include an accountant, a mergers and acquisitions specialist, and an attorney, in that order, he says. “You’ll hear business owners brag about the money they saved in fees because they did the negotiations themselves, when in reality they ended up leaving considerable amounts of money on the table,” Monroe says.

Know if you’re selling too low. How do you know if you are selling too low? Do the research before you decide to sell your business. “Finding out what a business like yours is selling for in the marketplace is not going to be very difficult in the internet age,” Monroe says. “In the end, you should confer with a professional who understands your industry and can provide data to find your business’ worth in the current climate. Don’t over-focus on the price. What you should focus on is how much you would put in your pocket when the sale is complete.”

“Selling a business involves considerable thought and performing lots of work with an unknown timeline,” Monroe says. “But doing it right can lead to the reward one deserves.”

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Terry Monroe (www.terrymonroe.com), is founder and president of American Business Brokers & Advisors (ABBA) and author of Hidden Wealth: The Secret to Getting Top Dollar for Your Business. Monroe has been in the business of establishing, operating, and selling businesses for more than 30 years. As president of ABBA, which he founded in 1999, he serves as an advisor to business buyers and sellers throughout the nation. His knowledge and expertise in multi-store operations and sales has led to many multimillion-dollar transactions. As an expert source in the convenience store industry, he writes a routine “Financial Insights” guest column for Convenience Store News and has been featured in numerous publications, including The Wall Street Journal, Entrepreneur magazine, CNN Money, and USA Today.

8 Common Mistakes Business Sellers Make

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