If you want to sell more businesses at a quicker pace, preparing a detailed business information package can help you achieve that 7-figure income. We often receive comments from other brokers on how quickly our businesses sell at Crowne Atlantic Business Brokers. I respond by stating “it’s all in the preparation of our package.” We take the packaging of our businesses very seriously. We believe every business is unique, and our job is to highlight those unique attributes and features, as well as how this business can work for a new owner. We borrow the eyes of a buyer and look at buying a business from their perspective. Of course, keep in mind that the best package in the world can’t fix horrible and/or inconsistent numbers. This article is assuming the business you’re selling is truly viable.
How To Make 7 Figures By Preparing A Great Package
Let us compare the business package to a bouquet of flowers. Many brokers offer bits and pieces of separate data such as a profit and loss in one file, and a tax return in another file, and if you’re lucky, an equipment list. The data looks like separate flowers spread out on a table; Buyers then see a mishmash of data with no organization or thought. It makes it easy to see why stores sell flowers in a bouquet. The flowers look better when beautifully packaged together. The information package helps tell the story of a business, and offers brokers an opportunity to add context to the financial data.
Instead of challenging Buyers to picture the operation for themselves, tell them the story. Give them a gorgeous bouquet of flowers instead of pieces of flowers thrown on a table.
When you create a package, you need to share with the buyer truly helpful and descriptive information on the business. The bare minimum standard list of items to have in your business package include:
- Executive Summary
- Location
- Financials
- Confidentiality
- Summary of Assets Included
- Equipment List
- Staff Chart
- Photos/Video Links
This list is quite basic, and your package should contain these items. When the main items are in your business package, look at it once more and ask yourself, “are you looking at this business package from the buyer’s lens?” Do you truly elaborate on the features in each of these sections of the package?” Are you thinking ahead to what questions a buyer will ask about the financials, the operation of the business, the layout of the facility, and the current team in place? Are you mentioning why features are or are not ideal, and how it affects the income of the business?
Easy Guide of What to Say
PACKAGE ITEM | COMMON DESCRIPTION | HOW TO ELABORATE |
---|---|---|
Location | Located in Central Florida | Located in an industrial area with great access to I-4. Cheaper rent. Business is next to reciprocating businesses that refer work back and forth |
Staff | Owner has 5 employees | Owner has one manager who manages evening hours and one who manages daytime hours, one bookkeeper, and one salesperson who has been there for 10 years. None of the staff is family related. |
Financials | Financials Tax return or P&L with no commentary | Show addbacks for 3 years; list any out of the norm expenses or situations...and there is something within 3 years at some point to list which stands out for every business I have ever seen. |
Equipment List | Partial equipment list | It is vital for you to understand what tangible and intangible assets are included in the transaction to be able to properly convey that information to the buyer. Prepare this in advance the best you can. |
AR/AP | Often this isn't clear in the package | DON'T OMIT! This is important to mention if there are receivables and if they are or are not included. |
Photos | One photo...maybe | This is your chance to create a visual of what this company physically looks like, or what the set-up of the business is. If there is a home office, see if you can get a photo of the space. If there is anything remotely fun, highlight it. Any business can be exciting! |
Lastly, most buyers ask the same set of questions. Help manage those expectations, and have these questions answered in the package. For example, when my daughter was 5, I told her “most adults are going to ask you the same questions over and over.” Questions like: How old are you? Do you like school? Where do you go to school? What do you want to be when you grow up?
I told her to expect these questions, and have some answers prepared. Why do adults ask the same questions? Many don’t know how to start a conversation with a child, or how to relate to a child, so they start with the same basic questions. It is the same thing with a potential buyer of a business.
Here is a sample list of basic questions I receive from most potential business Buyers:
- Why is the owner selling?
- How did you arrive at the valuation?
- Is there customer concentration?
- Are there repeat customers?
- What’s the competition?
- And most importantly, what is the growth potential?
It amazes me that most brokers cannot answer these questions about their listing. If you know you don’t have updated financials and the buyers are going to want it, why are you even putting up the listing? Can you really sell a business quickly when you, or the business, isn’t properly prepared? Sellers hire brokers to do one job…sell their business.
Being proactive and getting these questions answered in the package helps the potential buyer immensely, and saves time to weed out buyers that are not interested.
Sellers hire brokers to do one job – to sell their business. It is imperative that a broker not only makes sure that the business is ready to be sold, but that the broker is prepared to interact with potential buyers. Can a broker really sell a business quickly when the broker, or the business is not properly prepared?
When you have a properly prepared package, the Buyer’s first impression of the business is a beautiful bouquet of flowers. Offering Buyers a properly packaged business is one way to attain the 7- figure income as a business broker.
Jackie Ossin Hirsch
Crowne Atlantic Business Brokers
Five Tips for Successfully Navigating Due Diligence
As a business broker, one of your most critical responsibilities is guiding your clients through the transaction process. A crucial part of this process is conducting due diligence, which involves verifying the information provided by the seller to ensure that the buyer clearly understands the business’s operations and financials. Due diligence can be challenging, but with the following tips, you can navigate this stage successfully:
1. Know Who’s Who: As the point person during the transaction, you should orchestrate the communication with all parties involved. Get to know the buyer’s advisors – there’s always someone who has their ear – and build credibility early. Work with the seller to determine when the landlord should be contacted and involve the seller’s accountant as soon as possible – they often don’t move as quickly as you’d like them to.
2. Have Regular Meetings Along the Way: At the beginning of due diligence, hold a formal kick-off meeting to remind everyone of the milestones, re-set expectations, and discuss the best way to share information. Regular (weekly) meetings are crucial for maintaining communication and building trust between the buyer and seller. Hiding any issues with the business will damage everyone’s credibility, so it’s better to have the seller disclose them early.
3. Document Everything: It’s essential to document every communication with the buyer and keep copies of all documents provided by the seller. This documentation can be helpful if any disputes arise during the transaction. Electronic deal rooms are a great option to protect you in the long run – plenty of good options exist.
4. Have a Plan B: There’s always a chance that the transaction will fall through – every broker has lost a deal in due diligence – so it’s essential to have a backup plan in case this happens. The standard BBF APA does not limit you or the seller from discussing the business with other interested buyers. Keep fielding inquiries, setting meetings, and answering questions with backup buyers and their brokers. If your deal dies, you won’t want to start at the beginning again!
5. Keep Your Focus and Handle Your Emotions: Although you may feel as if you are almost done, the due diligence stage is where the sale can be made or lost, so it’s critical to remain focused. This is also when inexperienced buyers and sellers feel the most stress. As a broker, you should remain emotionally unattached and handle the transaction with the calmness that comes from being an expert in the field and having a history of successful transactions!
Ryan Cave, MBA, CBI, M&AMI, CMAP
President
South Florida District
View from the Driver’s Seat
It is well-known that the Business Brokers of Florida (BBF) is the largest and best co-brokering association of business brokers and M&A professionals worldwide. Since its inception in 1999, our founders have had the drive and true vision to set us on the path to be the example of what other business brokerage associations strive to become. Many years of experience and effort have gone into perfecting the never-perfect process of working with buyers and sellers to get deals done. Furthermore, the BBF has the numbers to back up these successes.
One of the main reasons for the BBF reaching such a high level of achievement is our membership. Many of our members believe we have built a culture of dedication to our association and the industry. Underneath are the folks that work to manage each district and those who volunteer on the many committees and task forces to bring about the change and allow us to continue on the path to growth and a prosperous future for all. Spearheading these ideas are the dedicated people in the ever-so-important board of directors and leadership positions, who are in the driver’s seat of what is yet to come. Did you catch the part that this has been accomplished by an all-volunteer organization?
Additional apparent factors to the BBF’s success are how the business brokerage industry has undergone significant changes, including the rise of technology, the increasing importance of online/social media marketing, and the ability to conduct meetings through platforms such as Zoom. As individual brokers, we see the effects of these advancements in our firms. Just think about how wonderful it is to get our principals’ contract signatures without driving across town. BBF is doing its best to keep pace with these changes, embracing technology to expand its reach and improve its services. By staying up to date with the latest trends and technologies, BBF can continue to grow and succeed in the future.
Over the years, we have taken steps to bring our association to the next level by making improvements internally through our MLS system along with the systems and processes that help us function. In addition, we gave the BBF a new look externally so that we may showcase our membership to the public. However, I feel that our most significant impact in 2021 was recognizing how important educating our members and having the right tools are to raise everyone in the association to equal footing. Last year was pivotal in the growth of all our members, where we have included a membership to our sister organization, the IBBA. This partnership fills the educational and broker benefits void as only the IBBA can do.
The district and state boards have worked tirelessly to improve what Ken Stebbins, Roger Murphy, Steve Raptoulis, and Sandy Cosenza envisioned. Since I have been on the local and state boards and in leadership, I have personally worked with some of the brightest hard-working brokers/members who dedicate their time for the betterment of us all. However, this comes with a cost to each individual and their business, who sacrificed to get things done. Fortunately, the collective wisdom of our board of directors recognized the need to take the BBF to the next level and understood that, in order to get there sometime this decade, we would need professional support.
In 2023 we set the BBF on the road to the next level of greatness. The board’s unanimous decision to bring on a management team to help us succeed in many plans and projects we’ve mapped out will mark this time when we witnessed our association’s transformation. Over the next few months, and years, you will see/experience some incredible improvements and new ideas that will encourage, educate, and, quite frankly, directly impact how we do business as individuals and as an association.
A little over two years ago, I was fortunate to be given the keys to the BBF. When I first sat in the driver’s seat, it was intimidating and exciting at the same time; with great responsibility and humility, I adjusted to my role in moving us forward in the direction of our growth. As I sit behind the steering wheel, glancing back in mirrors of our history and where we came from, then turning my focus to looking out the windshield of the BBF’s future. The view from the driver’s seat is quite incredible, and I’m excited for us all for what is yet to come of the world’s best co-brokering business broker association.
Joe Shemansky, CBI, M&AMI, CM&AP
BBF Chairman
Business Brokers of Florida
How Leases Factor into Business Sales
If you’re planning to buy or sell a business that involves a lease, this can lead to an extra level of complication. Oftentimes, such as in the case of a restaurant or retail establishment, the location is essential to the success of the business itself. That means that if you’re buying a business, you’ll have to make sure any lease issues you might encounter are straightened out before you sign on the bottom line. But even if you’re buying a business that isn’t location-sensitive, you’ll still want to iron out all the details about your lease ahead of time.
Negotiating a Lease
If you’re buying a business with a lease, one word of advice is to have a clear way out of the lease in the near future. After all, with a business so new to you, you might make changes in the short term. The general recommendation is to negotiate a one-year lease that has an option for a longer period of time.
In many instances, the buyer of a business with a lease will find that he or she doesn’t have too much leverage. However, buyers typically find that there is more opportunity to negotiate if the lease is close to its expiration date or the business is performing poorly.
Future Contingencies
When you’re first negotiating your lease, you may also want to think about the big picture. For example, if your business is in a mall, you might want to confirm that no future tenants will be allowed to move in and be your competition. Along similar lines, some businesses located in shopping centers seek to outline a reduction of rent if the shopping center’s anchor store were to close, as that could negatively impact the business.
When you negotiate your lease, you’ll also want to think about the far-off future when you’d like to sell the business. You will want to make sure that the landlord allows for lease transfers, and you’ll want to confirm the requirements necessary for a potential transfer.
Another thing to consider is what if the property did become available in the future? If this were to occur, you might want to negotiate the option to potentially buy the property. Otherwise, you might find yourself in an unfortunate situation where you are forced to move your establishment.
Basics for Your Lease
A lease should always outline your responsibilities as well as those of your landlord. Make sure you carefully review the lease with your attorney. You’ll want to be sure that you thoroughly understand all the terms. It should cover various issues that might arise in the future and how they will be handled. For example, if there were a fire or disaster, who would pay to rebuild the building? How are the taxes, fees and maintenance handled for the property?
Unfortunately, in some situations a landlord’s lack of flexibility with a lease has even sunk a deal. If the landlord is unwilling to agree to a new lease or offer concessions to an ongoing one, buyers often will find the situation too restrictive. In certain instances, however, sellers have been willing to offer concessions to buyers to counterbalance issues with a lease.
The fate of your business could literally depend on your lease. If you set things up correctly in the beginning, it will most likely benefit you tremendously in the long run.
Copyright: Business Brokerage Press, Inc.
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How Can You Identify a Serious Buyer?
No one wants to waste their time and energy trying to sell their business to someone who isn’t actually planning to buy. That’s why it’s so important for you and your business broker or M&A advisor to focus on the most qualified and serious buyers. But how can you really make these kinds of assessments about a buyer’s viability until they sign on the dotted line? Let’s take a look at some signs that will help you figure out your buyer well in advance.
Do they have a history of ownership?
When someone has owned a business in the past, they have a firm understanding of what is involved. As a result, they are more likely to be a serious buyer. It also means they are more likely to move forward. You will also find that they have the ability to make a substantial down payment and financing options. While they might want you to help them with financing, you should still be looking to ensure they will put their own capital at risk as well.
Are they seeking information about your cash flow?
If a buyer is serious, it goes without saying that they will want to make sure the business is profitable. They should be asking a lot of questions about not only your cash flow, but also your inventory. If you have unusable inventory this could be of concern to a buyer. Be sure to disclose this information upfront, as it will likely be discovered in the due diligence process regardless.
Are they asking about the health of your staff?
Any real buyer would want a dedicated and reliable staff. If your buyer is asking about salaries, it is a good sign that they are serious. After all, if you’re only paying minimum wage, chances are that your staff will not have a lot of staying power. These days, many companies are suffering due to staffing issues, and it’s something that should be front and center in any serious buyer’s mind.
Do they have an interest in the industry?
If your prospective buyer is asking questions about the industry, that is another good sign. After all, who would really want to buy a business without detailed knowledge about the industry they are about to enter? Along the same lines, if you know your buyer has experience in a given industry, it means they are more likely to go through with a purchase. If they lack experience in your industry, do they at least seem passionate about the industry? If they seem like they are not asking probing questions, this might mean they are wasting your time.
Are they asking about capital expenditures?
Your prospective buyer will want to know how money is being spent. You can expect them to make sure that major expenses have already been paid for as they will want to make sure they won’t be caught off guard by large pending purchases.
Do you have professional assistance?
The bottom line is that the more in-depth questions a person is asking, the more serious they are likely to be. Your business broker’s job is to screen prospective buyers. Years of experience doing so helps them know the warning signs that pop up when buyers profess to be interested, but are not likely to go through with the sale.
When you are trying to sell your business, it is critical that you focus your time wisely. Your brokerage professional will help ensure that you do not waste time working with people who are just kicking the tires.
Copyright: Business Brokerage Press, Inc.
The post How Can You Identify a Serious Buyer? appeared first on Deal Studio – Automate, accelerate and elevate your deal making.