Author: Sasa

I have been asked a thousand times what makes a good listing? My answer is simple – I want a business with potential to grow, that has three years of rising sales and profits, has perfect financial records and a highly motivated seller. If you can’t find one of them, you might take some listings that don’t quite check all the boxes.

It might be easier to list the things that can make a business not sellable. We have all run into these conditions – sloppy financials, lack of customer diversity, too much family working in the business. The list is long. At the top of the list are seller motivation and seller expectations. Many of the problems can be overcome if the seller is truly motivated and his or her expectations are realistic.

So many people will only sell one business in their life. Because of our association with real estate, many view selling a business like selling a house. It is not. While we share the same license, we are not real estate agents. We are business intermediaries. Our roles are different.

It is the role of the intermediary to set expectations. You are in charge of that! In my experience, expectations must be set before taking the listing. I recently closed a transaction that I worked on for three and a half years. The sellers would not budge on their price (50% above my initial valuation). Under no circumstances would they hold a seller note. They had to have a buyer with direct industry experience. They also had no financials when I met them 3.5 years ago. I was able to keep the listing and achieve success because the seller’s expectations were set. I told them at the beginning this would not be quick. I educated them about the valuation and what was driving that number. I connected them with an accountant and told them to keep running the business. If you continue to grow the business, it will eventually be worth your asking price. They did and it worked.

Usually, the biggest expectation we deal with is price. If my valuation says $500k and the seller wants $1.5 mil, the meeting is over – call me if you need my help. I think it would be unethical – as a professional – to take a listing far above my valuation. By taking that listing you are telling the seller it is possible. That feels like misleading to me.

You can make your listings more sellable. Set reasonable expectations at the beginning. Dig in deep and find the issues that could be a deal stopper. Be prepared to explain the issues and propose solutions. Stay in close contact with your sellers. Update financials monthly. They need to show growth even if it is modest. The trend (direction) is critical.

Your knowledge and training brings a lot of value to the transaction. They can’t do this without us.

Happy selling.

Suppose it were possible to simplify what we do as business intermediaries. In that case, we would be best described as trusted advisors or confidential facilitators between the buyers and sellers of a business deal. One of our many objectives is to help business owners sell their businesses for the best possible price while ensuring buyers get a good deal. In some cases, however, a single intermediary may find it challenging to provide their clients with the best possible service. This is where co-brokering comes in.

I understand that co-brokering is not a popular idea for many intermediaries throughout the world. However, for the Business Brokers of Florida® (BBF) is not only a governing rule of our association; it is a proven fact that co-brokering completes more deals for buyers and sellers. Additionally, this is confirmed in the numbers where almost thirty percent of the deals completed in the BBF in 2022 were co-brokered between our members.

For the unknowing public, co-brokering is a process where two or more intermediaries work together to facilitate the sale of a business. The benefits of co-brokering are numerous, and they can help both intermediaries and their principals. One of the main benefits of co-brokering is that it allows intermediaries to pool their resources and knowledge to provide better service to their buyers or sellers. For example, if one broker has more experience in a particular industry, they can share their expertise with their co-broker, allowing them to provide better advice to their principals.

Another benefit of co-brokering is that it will allow intermediaries to reach a wider audience. However, this mindset could be overlooked by an intermediary who is more concerned about splitting the deal. By working with another intermediary, they can tap into a larger network of contacts and potentially reach more potential buyers. This could be particularly useful for an intermediary who may not have a strong presence in a particular geographic area or industry. This is also an added benefit when an intermediary doesn’t have a specific type of business for a buyer in their inventory, allowing options of co-brokering other firms listings.

Co-brokering can also help intermediaries manage their workload. As many of us have experienced, selling a business can be time-consuming, and it can be challenging for a single intermediary to manage all aspects of the transaction. By working with another intermediary, they can share the workload, allowing each intermediary to focus on their strengths and provide better service to their buyers and sellers.

Additionally, co-brokering can help brokers mitigate risk. Selling a business involves a significant amount of money and many legal and financial factors that are to be considered. By working with another broker, brokers can ensure that they follow all necessary procedures and that their principals and the firms, are protected throughout the process.

Co-brokering can help brokers build stronger relationships with buyers and sellers. By working with another intermediary to sell their business, buyers and sellers may feel they are getting more attention and support. It can help build trust between the principals and intermediaries, leading to future business opportunities.

In conclusion, co-brokering can be a highly beneficial arrangement for business intermediaries. It allows them to pool their resources and knowledge, reach a wider audience, manage their workload, mitigate risk, and build stronger buyer/seller relationships. By working together, intermediaries can provide better service, ensuring buyers and sellers get the best possible deal.

To all my fellow business intermediaries out there, do you co-broke? If not, why?

The difference between SDE & EBITDA

SDE and EBITDA are both financial metrics used to assess the profitability of a company, but they focus on different aspects of a company’s financial performance.

SDE stands for “Seller’s Discretionary Earnings.” It is a measure of a company’s earnings that is calculated by adding up the net income, owner’s salary, and other non-cash expenses such as depreciation, amortization, and interest expense. SDE is often used to value small businesses or to determine how much income a business generates for its owner. SDE considers the cash flow available to the owner after all the business expenses have been paid.

EBITDA stands for “Earnings Before Interest, Taxes, Depreciation, and Amortization.” It is a measure of a company’s profitability that shows how much earnings the company generates before accounting for certain expenses. EBITDA is often used in financial analysis to compare the profitability of different companies, as it eliminates the impact of different financing and accounting strategies. EBITDA does not include interest expenses, taxes, depreciation, and amortization, which are considered non-operating expenses.

In summary, SDE is a measure of the cash flow available to the owner of a business, while EBITDA is a measure of a company’s operating profitability. SDE includes owner’s salary and other non-cash expenses, while EBITDA does not include interest expenses, taxes, depreciation, and amortization.

How to calculate the SDE

To calculate the SDE you need to start with the company’s net income and add back certain expenses that are not essential to the ongoing operations of the business but may be necessary for the current owner to maintain the current level of earnings.

Here’s the formula to calculate SDE:

SDE = Net Income + Owner’s Salary + Depreciation and Amortization + Interest Expense + Non-Recurring Expenses + Other Non-Essential Expenses

Here’s a breakdown of each component:

By adding up these components, you can calculate the SDE, which provides a measure of the cash flow available to the owner after all business expenses have been paid. This metric is often used to value small businesses or to determine how much income a business generates for its owner.

How to calculate EBITDA

EBITDA is calculated by taking a company’s earnings before interest, taxes, depreciation, and amortization. The formula for calculating EBITDA is as follows:

EBITDA = Net Income + Interest Expense + Tax Expense + Depreciation + Amortization

Here’s a breakdown of each component:

By adding up these components, you can calculate a company’s EBITDA. This metric is often used by investors, analysts, and lenders to evaluate a company’s financial performance, as it provides a measure of its operating profitability before accounting for certain expenses.

When to apply SDE

For main street businesses, it is typically more appropriate to use SDE rather than EBITDA for valuation purposes. The reason for this is that SDE considers the owner’s salary and other non-cash expenses that are unique to small businesses, which may not be captured by EBITDA. This is important because small businesses often have a significant owner involvement and the owner’s salary is a major expense that affects the profitability of the businesses.

In addition, main street businesses may have different financing and accounting strategies than larger businesses, which can impact their EBITDA calculations. SDE, on the other hand, provides a more accurate representation of the cash flow available to the owner after all business expenses have been paid.

To sum up, SDE is a more appropriate valuation metric for small businesses because it reflects the unique characteristics of these businesses and provides a more accurate picture of their financial performance.

When to apply EBITDA

EBITDA is often used to value mid-market businesses for several reasons:

Comparable Metrics: EBITDA is a widely accepted metric for valuation and is often used as a benchmark in the market. This means that it is easier to compare the valuation of one business to others in the same industry or market.

Focus on Operating Performance: EBITDA focuses on the operating performance of the business by excluding non-operating expenses like interest, taxes, depreciation, and amortization. This provides a clearer picture of the business’s operating profitability, which is important for investors and potential buyers.

Flexibility: EBITDA provides flexibility in the valuation process as it allows for adjustments to be made for one-time or non-recurring expenses that may not reflect the ongoing operating performance of the business. This flexibility allows for a more accurate valuation of the business.

Investor Preference: Many investors prefer using EBITDA to value mid-market businesses because it allows for easier comparison to other businesses and is seen as a more objective metric.

In conclusion, EBITDA is a more appropriate valuation metric for mid-market businesses because it provides a clearer picture of the operating performance of the business, is widely accepted in the market, and allows for flexibility in the valuation process.

Get your lease ready before you sell! Instruct your seller to start thinking about the future at lease renewal time.

Get your lease ready before you sell! Instruct your seller to start thinking about the future at lease renewal time.

Over 80% of the return you will make on your business will come when you sell. Do not let your landlord oversee your transaction.

The time to negotiate is when you are leasing or renewing a lease. Keep these things in mind at the time of renewal. At other times you are bound by the terms of your lease.

3 things you can do when negotiating a new lease.

1. Make sure the lease is freely assignable. You do not want to go to the landlord for approval to sell. This can kill a deal and all future deals.

2. Build defined renewal options into the lease. A buyer using SBA financing will need a lease agreement with a term or options as long as the loan term. This is typically 10 years.

3. Do not personally guarantee the lease. The personal guarantee puts the tenant’s own assets on the line should their business not be able to pay the rent or other lease obligations.

Preparing your Buyer for discussions with the landlord:

AND DON’T FORGET YOUR COMMISION!!!

As a Licensed Real Estate Agent, you have just negotiated a real estate lease. This is standard practice. Don’t leave money on the table!

Our recent awards ceremony was a fantastic event to recognize and honor the BBF’s best of the best and to recognize several individuals for their exemplary dedication to our great association. In addition, the event served as a testament to the exceptional skills of the top-producing business brokers and showcased the power of co-brokering. Collectively we continue to make our mark in the world of business intermediaries.

It was great to see so many familiar faces and quite a few new ones. Even with the early morning awards breakfast starting time, there was great excitement from the over one hundred and thirty folks in attendance. I was honored to have Mrs. Roberta Caputo, BBF Vice Chair, as my co-host of the event. Hearing her share background information and particular details of many award recipients was fantastic. Her insight and glowing personality were the perfect match for this special occasion.

The BBF had record-breaking 209 top-producing award winners for the year 2022. As an association, our top producers sold just shy of one billion dollars in businesses, which is an outstanding accomplishment. What makes these numbers even more exceptional is our business intermediaries co-brokered almost thirty percent of the 1161 deals closed last year. Demonstrating yet again the value of co-brokering to our buyers and sellers, along with other intermediaries.

The list of winners is quite long, too long to share here in this article. However, the complete list of winners is showcased on the BBF member section of our website, and I encourage each of you to review this list to congratulate your fellow members on their extraordinary achievements. With that said, I want to highlight the best of the best across the whole state, as it takes a considerable amount of work to outperform all the highly skilled professional intermediaries in our association.

From the over three hundred plus co-brokered deals across the state, Rick Gruber in the Tampa District took the “Most Co- Brokered Deals” award. In addition, Tampa District gave us another top producer of closing fifty-four deals, awarding the “Most Done Deals” for the state going to George Antonaklas. Finally, the North Florida District had the intermediary who produced the “Highest Deal Value” for the whole state, John Geiwitz. We are honored to have such talent in our association, raising the bar for next year’s award winners.

I would be remiss if I didn’t acknowledge the accomplishments of our service award recipients. As the Chairman, I must decide who I felt impacted my role in leading the BBF. While there were many people to choose from, however, there were two individuals that stayed at the top of my list, so I decided to honor them both. Therefore, I was pleased to bestow the “Chairmans Award” to Mr. Mark Habib and Mr. George Rosen. This is the first year that we’ve recognized one of our affiliates. Many of us in the association know this gentleman as one of the best closing attorneys in the state. For over 40 years, he has closed hundreds, more likely a thousand deals. What is little known is that Mr. Steven Kutner has been quite generous of his time to our association, providing legal advice where needed, and has been instrumental in drafting quite a few of the documents we use daily in our deals. For this, we honor Mr. Kutner with the “Exceptional Service Award” and wish to thank him for his service and dedication to the BBF over the past 23 years.

The highest and most prestigious award in the BBF was created in honor of one of our founding members Mr. Ken Stebbins. This award is passed from the 2021 recipient Mr.John Hoyt to recognize the member who has shown exceptional dedication and sacrifice to the BBF. This individual has been instrumental in many of the improvements we all enjoy over the past several years. In addition, whenever there is a request for help, he raises his hand repeatedly. It is an honor to see Mr. Paul McNally receive the “Ken Stebbins Award”.

In closing out this incredible event, we want to acknowledge an exceptional person who was not only an amazing business intermediary but was instrumental in inspiring his daughter to become one of our association’s best intermediaries, business owners, and incredible leaders. Unfortunately, with great sorrow, we lost Mr. Jean Kruger a few months back, so we felt it befitting to honor Mr. Kruger with the “Honorary Membership” award by presenting this to his loving daughter Mrs. Roberta Caputo.

We are the biggest and best business co-brokering association globally, with over two hundred award winners to prove it. I congratulate you all and look forward to your successes in the next year.