Category Archives: sell a business florida

Negotiating from a Business Owner Business Broker Perspective

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As a Small business owner or Entrepreneur, we find ourselves always negotiating.  We negotiate with our vendors for better prices/terms.  We negotiate with our spouses to spend just a few more hours at the office before we come home for dinner.   I believe everyone’s views and methods of  negotiation are as different as our taste in music.

Negotiating When Buying Or Selling A Business

My profession as a business broker certainly involves negotiations at most every step of the long process of buying and or selling a business.   Someone “needs” to sell their business, he “needs to sell at this price”,  according to all the other Business For Sale , his price is 3 x what other like businesses are asking, I find myself “negotiating or discussing” the merits of his target price.  My previous position as an owner of a small business with 25 employees and handling manufacturing, transportation, multiple office locations, and distribution required constant negotiation. I used to formally review my employees on an annual basis.

They generally expected a raise.  Before the meeting, I would calculate what the company could afford, set a range and meet with the employee.  I never viewed this process as a meeting that allowed negotiation on wages.  I viewed it as a means to allow di-directional feedback, but the wage increase was not an arbitrary number.  Very often employees would ask for more, I think just because they thought that is what they were supposed to do- which is fine with me.  They viewed this as a negotiation, I viewed it as something else.- This was just part of my personality or philosophy on negotiation.  I had fantastic long term employees and we would later negotiate days off, holiday pay and other items, but raises were not a point of negotiation.   Again, I think we all have our own unique views and ideas on negotiation.

Very often how ones negotiates may be a matter of his or hers personality.  Other time “someone told me or taught me” how to negotiate and that becomes the norm.  Currently as a business broker I do have to negotiate terms and conditions of me helping a business owner sell a business.  The line between negotiation and discussion does become blurred and for me I think it is fine to have business negotiations and business discussion become one and the same thing.

My Negotiation Tips For You

1.  I find I don`t get so caught up on the concept of negotiation and semantics.  I find that we have a business decision to resolve, we have 2 parties seeking to resolve it, and the 2 parties work together to seek resolution. Put yourself in the position of having options and the process has the potential for the best results.

2.  Its not always about price.  I have been through the process of negotiating  leases on a facilities, annual purchase orders with major suppliers, and larger purchases of capital equipment and many other “negotiable situation.  Very often the person that I am trying to reach agreement with is very strong and firm upon the price they believe is needed.  And in many situations I have been willing to accept the price desired by the other party, BUT I make absolute sure the other party hold true to every other term and condition within the agreement.

So my position is ok let us go with the price you desire, but it is mandated that delivery date, guarantees, support, followup and every other item involve with this matter is followed completely.  At times I feel that such value can be added thru the other terms that the actual price is really a value to both parties.  Or as it relates to my current profession as a business owner selling a business, I will give you a $50,000  price reduction, but I want a personal guarantee on the buyer, I want 8% interest instead of the 7% interest the buyer is offering for me to finance my business, and I want the owner to stay on as a free consultant for an extra 3 months.  SO the person buying the business gets the reduced price, and the seller gets some real added value.

Negotiation And Business Price

Photo (c) thesologuide.com

3.  One more point about price.  How many times have we been working thru a deal and felt the need to drive the price down to a level that the seller is willing to accept but not really happy with.  Then a week later when we want this little extra help or assistance or concession and we hear “We’re already losing money on this deal and we really cant help you with that”.

4.  Really a good deal is a deal that is good for both parties.  Sometimes one party can leave the “negotiating table ”  knowing that it is a great deal for him/her, and knowing that the other party is “taking a hit”.  How does that help sustain an ongoing relationship.  There are businesses that are ok with the “one and done” concept and have little regard to the effect on the other party.  I think our globe is fairly small, and getting smaller and I aspire, plan and count on all business relationship being perpetual.  Again the example about buying or selling a business.

If you are selling a business and you want a price that is higher than the actual business can justify, and if you provide some seller financing to the buyers, what is going to be the result of you getting this inflated price.  Very likely it results in the buyers of the business, not being able to make payments to you, going into default, and you having to deal again with the business that you originally sold because you had not longer wished to be dealing with it.

5.  Dont mistake negotiating with wishing or hoping.  If you know the terms that you need to attain to make the deal make sense to you,  be prepared to walk away from the deal. Are you making an offer and hoping /wishing the other party takes it because you know you want or “need” this product or service?  Be prepared to walk away form the deal, again try to put yourself in the position of having options.  If someone is wanting to buy a Towing Business and makes a bottom line offer to someone selling,  it helps the potential buyer knows that there are 3 other similar towing businesses for sale in the area and is fully prepared to pursue these other options.

Steps Involved with Buying Selling a Business

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Buying or Selling a Business is a process.   The below provides a framework to define the process and steps needed to buy or sell a business.  The size and type of business that one may be buying or selling will influences the complexity of each of these steps.

1)  INITIAL INFORMATION REVIEW–  Confidentiality and Non-Disclosure Agreements are signed to assure confidentiality related to this  private matter.  Irreparable harm can occur if the confidential content of discussions and negotiations are improperly disclosed. Seller reserves right to approve potential buyers and may require that additional buyer information/capability be submitted before confidential information is released to the  buyer of the business.

2)  THE INITIAL MEETING: At the first meeting, the potential   buyer of the business  will want to know the seller’s motives for selling the company as well as more detailed information about the business and the seller will want to know how if  the buyer is the type of person to whom he wants to sell the company. If the results of the initial meeting warrant further consideration of the deal, the buyer will next begin to evaluate the company and develop a financial structure for the proposed business purchase.

3)  THE LETTER OF INTENT/PURCHASE CONTRACT: Either a contract with

contingencies or a letter of intent will be presented. A letter of intent may have an ” escape clause”  in it to allow one or both parties the opportunity to withdraw from the deal if certain conditions are not met.  The letter of intent will address :

  • The purchase price/ consideration – Selling price of cash, notes, equity, or some combination of these.
  • What is being purchased — Assets, liabilities, and operations that are being transferred to the buyer and those being retained by the seller should be identified.
    Buying Or Selling A Business

    Photo (c) webuybusinesses.com.au

  • Structure — The parties need to agree about whether the sale will be a sale of assets, a sale of stock, a merger, or some other structure. Whether the SBA, bank, or owner takes back a note, the company cash flows must be able to support that loan.
  • The definitive purchase agreement — As the buyer begins its detailed evaluation of the company, the attorneys will be preparing the purchase agreements. The Sales Purchase contract is usually drafted by the buyer’s attorney.
  • Due diligence — The seller will need to have ready his financial records, all corporate records,pertinent  contracts and all pertinent other  documents  that the buyer of the business will be requesting for review once the letter of intent or contract is signed. This will allow the buyer of the business to analyze the company in greater depth to determine whether everything has been represented properly, whether he wants to buy the company, and, if so, the appropriate price to pay. A purchase price is usually negotiated based in part on historical financial information. and future potential earnings.
  • Escrow — The buyer will establish an escrow account  into which his initial  Good Faith deposit of monies shall be deposited and handled by a 3rd party escrow agent .
  • Other significant items-  non- compete terms,  and employment contracts.   leases and long-term purchase contracts, and any other pertinent business agreements shall be addressed.
  • Professional fees – Usually the buyer and seller will bear their own costs for attorneys and accountants.
  • Conditions and Timing for closing. Usually the closing is within two weeks after all contingencies have been completed, and like most steps in the buying or selling of a business this time is negotiable.

4)  CLOSING– Once all issues have been resolved, the documents are signed, and the consideration exchanges hands, the deal is in condition to close. The actual closing marks the conclusion of the process.

Again buying or selling a business is a process and depending upon the size of the business and type of business this process from start to end can take several months or even longer.  Due diligence when buying or selling a business is a very important part of this process. Negotiations are made at most every step of the process as new information becomes available and additional analyses are performed.

In a successful negotiation, both the buyer and the seller need to be flexible and to understand which points are important  and which ones may be “deal breakers”.  Most people may buy or sell a business maybe once in his or hers life.  Following  the advise of a trusted advisor such as a business broker can help increase the likelihood of a successful business sale or business acquisition.

I’m Looking to Buy a Business

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“I’m Looking to Buy a Business“.  As a business broker based here in Florida  this is a statement that I hear often.  Within  the industry various statistics are stated regarding business buyers.  I have heard that 9 out of 10 of those that say they want to buy a business actually don’t buy a business.  Based on my experiences that statistic may hold true.  There are so many currently employed that during their 40- hour work week aspire to “be their own boss” by starting their own business or buying their own business.

Live Your Dream – Buy A Business

There are many unemployed out there that also think they may want to buy or start a business.  So while there are probably as many as millions of those both currently employed or unemployed that aspire to buy a business or start  a business, there is a much much smaller subset of those that even attempt to act on those aspirations.  Of that small percent that actually act on their dreams and or  goals a small percent may contact a business broker such as myself, and a small percentage of that group may find themselves at a closing table signing documents and actually buying a business.

Many business acquisitions are done with out the assistance of a business broker.  The numbers of how many entrepreneur types set off to buy a business and successful find a business without the professional assistance of a business broker are unknown to me.  I personally  had bought several businesses on my own without the assistance of a business broker.

These were strategic acquisitions within a certain industry.  I personally feel these types of acquisitions have a higher success rate.  Existing relationships, industry knowledge, focus,  and synergies provide for a higher success rate.   My views on this are based upon a fair amount of first hand experiences of myself and peers. This discussion is based primarily on non- strategic type acquisitions as referred to above.

Buy A Business

Photo (c) richardparker.com

Just one of the many steps in the process of buying a business that I assist in is how to apply some focus and some parameters to the basic statement of “I want to buy a Business”.  Being my company website is Sell a Business Florida I assume the person contacting me thru my website is looking to buy a business in Florida, but very often many of the other parameters have not been carefully considered.

When one is looking to buy a business criteria can range from looking at a certain specific company, to a certain “type” of business, to “I want to buy A business in the state of Florida”.  If you (or someone that you know) are currently employed and want to act on aspirations to buy their own business and gain the feeling of control of ones destiny, or are currently unemployed and view buying a business  to be the best means to a gainful career please consider the following.

Things To Consider Before Buying A Business

Below are a few parameters to consider when searching to buy a business.  The list can be long and extensive but the below is a starting point that allows the search to buy a business to maintain some focus.

  • Location-  For business purposes and family purposes does the business need to be in a certain State, County, City, or a certain side of town?  Or are you looking to buy a home based business that you can operate from most anywhere in the world?
  • Type of Business-  Are you looking to buy a certain type of business  like a Landscape Company For Sale or Towing Business For Sale , or are you looking to buy a business that has maintained certain performance levels such as “I want to buy a business that has at least 3 consecutive  years of  Net Income of $100,000+”.
  • Are you looking to buy a Hands on or Hands off business.
  • How much Available Capital to do you have? – This will set a range of businesses that you may consider.  Keep in mind that both Available capital for buying a business and Working Capital for running the business should both be considered.
  • Are you looking for a business that includes real estate
  • Are you looking for a business that provides Seller Financing?

Prospective Business Buyer– ” Hi Scott I am looking to Buy a Business in Florida” Scott– ” Great,  What type of business are you looking to buy” Prospective Business Buyer – “I really don’t know”

Are Todays Job Seekers Tomorrows Business Buyers

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In Business Acquisition and Sales  the “pool” of  most future business buyers are currently employed by someone else right now.  The same applies for future Entrepreneurs.   But what about those currently unemployed?

The job market seems to have an abundance of very qualified people chasing a very limited number of jobs.  The number of those unemployed in the US seems like a fairly difficult number to track, but with unemployment in the 9-10% range-depending how you measure or guesstimate  it seems that you have well  over 10,000,000 (ten million) people unemployed here in the United States. Is owning your own business by either starting a business or buying a business a viable option for those unemployed.

Is Buying A Business The Future For You?

Is buying a business or starting a new business the right career path to all of those seeking to “re-find” a career or just get off the ranks of the unemployed.  Buying a business or starting a business is not for everyone, but it can be a very viable option for many.  There are the both mindset obstacles to overcome,  and finacial battles to be won before one can make the transition  from employee or currently unemployed to one that owns and operates their own business.

I personally think overcoming the mindset of  “can I do this?” may be the bigger of the 2 obstacles. To over use a saying- “Thinking outside the box”. Personally I feel there seems to be so many that are “trapped” inside the box, that  thinking outside the box in this situation can be a life changing situation.  I believe that many of those so many qualified individuals that are currently unemployed will consider “going out on their own” and enter the world of entrepreneur by either starting or buying a business.

For example- I am working with a business owner of a small computer service store, assisting him in selling his business.  He is very anxious to sell his store as he has plans to move out of state to be near a friend and join him in a business venture there.  He recently reduced his price to $65k due to his increased interest in moving on.

Buying A Business

Photo (c) lusens.com

He runs a viable one man business, works about 40 hour  weeks, and his business is up over 2009 numbers.  His “Owner benefit” is approximately $70,000.  So are you buying a job that pays you $70,000 a year?  Are you buying a career?  Are you buying the ability to control your career? It can be a nice situation for the right person.

Sending off resumes, searching the job board, going on job interviews can almost turn into a routine that may seem to have no end.- Is it a comfort zone, is it doing everything you can do to find your next career.  I suggest spending a few minutes  looking on a website such as mine Florida Businesses For Sale , or maybe some other larger business for sale websites like www.bizbuysell.com or globalbx.com, or possibly look on Flippa.com to see what sort of businesses for sale are out there, or possibly a website, or e commerce site may be available, what are the cost,  and is it even a possibility based on ones current situation.  I think one should at least allow the concept of buying a business or starting a business to come into the equation.  Certainly owning or running a business is not for everyone, but is it for you?

5   Reasons not to consider starting your own business or buying a business.  – Or maybe you should…

  1. Money is needed to buy a business or start a business–    but do you have any realistic feel of how much it would take.
  2. Ive never bought a business before or started a business before – talk to most all businesses owners that have owned their business for 10+ years and they will also say the same thing.
  3. The economy is doing so bad now, its just the wrong time to try a new venture.- There are many business owners that have and are delaying the sale of their business.  A “pent up” demand is being create.  The workings of supply and demand show that as supply increase prices reduce.And of course also  the choices are more abundant.
  4. Some people are just more prepared to buy a business or start a business.  This is true, but are you one of those “some people”.  When you talk to long time business owners you learn that all the uncertainty that you may have while making this major decision is completely normal.
  5. My Job Searching is  really going well- I think that is great, my decision to “be my own boss” 20 years ago was about controlling my own destiny,  perhaps there are different ways to do that.

My profession involves a lot of time talking with business owner regarding their short and long term business plans.  Many current business owners feel they need to get their financials/ and Sales  back up to a level commensurate to the value they seek from the sale of their business. This is creating somewhat of a pent up supply   I also speak to many potential business buyers and understand that everyone’s situation is so different. Available money, family, location, other personal matters all go into the evaluation.  Part of my long term planning of my business broker activities does assume that many of todays unemployed will be tomorrows business buyers.

What Does it Really Feel Like to Sell Your Business

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You are thinking about selling your business. You may have uncertainty, angst, worries, trepidation, fear, unknowns, and sleeplessness nights.  I believe you are not alone. My approach as a business broker in Florida is from a perspective of a former long term business owner.   I truly feel some of the feelings I experienced as  a business owner are very similar or the same of the business owners I work with as a business broker.

While at this stage of my professional life I am “sitting on the other side of the desk” I feel I do understand the concerns, fears, thoughts of the person on the other side of the desk.  There are many qualified experienced business brokers that are not former business owners and these quality brokers bring various valuable perspectives and experiences that benefit their clients.   My choice to pursue my “2nd career” as a business broker comes from my recognition as a business owner of the value a business broker can bring.

Should You Sell Your Business?

  1. If I sell my business Do I have enough to retire?
  2. What will I do after I sell my business.?
  3. What will happen to my employees?
  4. What will I sell my business for?  Is it enough?
  5. How do I handle all the “little situations” that are part of most any business prior to selling my business?

Does the business owner considering the sale of their business that they were involved from the beginning/day one of the business differ from business owners that had bought an existing business?- Of this I am not sure but  somewhat curious if there is a difference.

While it is awkward for me to share personal thoughts in such a public forum, possibly some of my experiences may help others in this very important decision. Some of my thoughts and experiences:

  • I had felt that the decision to sell my business was equally as difficult as the
    Sell Your Business

    Photo (c) mabusinessbrokers.com

    process of trying to sell the business.  But selling a business is a difficult process.

  • I had made the decision that if I wanted to sell the business that I would do it under my timeframe, (and when I was mentally ready to sell my business)  and not wait until a situation or market or business conditions forced me to sell the business.   This decision may have had me miss an opportunity to sell at a higher multiple in the late 1990’s when acquisition values where higher inside my industry, but mentally I was not ready to sell at that point.
  • My CPA (accountant) that was a very close advisor to me would always say regarding the sale of the business- “You will know when you are ready”. I believe in this statement and it did apply to me.
  • While going thru the process of selling the business, I always ran the business as if the deal would not consummate.  I dont believe you ever really know a sale will occur until signatures are had at the closing table.  Even at the closing table on late Friday afternoon, I was still thinking of things I would need to be doing Monday as if I were to remain the business owner. Habits are hard to break and it seemed prudent.
  • Maybe the proceeds from the sale of your business will allow you to comfortably retire and do nothing.  Maybe the sale of your business will give you a little extra cash to save or spend on something you want.  Maybe you dont know if the proceeds from the sale of your business is enough “to retire on”, but possibly its enough to allow you to choose an activity, 2nd career, or even work for someone else without the need to solely rely on this decision as your sole source of income.  This can be a very comfortable position.

Take My Advice If You Decide To Sell Your Business

I have shared with a few others that after the sale of my business of 20 years I experienced a feeling that was very foreign to me that caught me by surprise, and is kind of difficult to describe.   When my business was sold what I was really selling was my responsibility.  As all business owners know- you are responsible for everything.  If  an employee makes a mistake at work, it is your responsibility.  If sales goes down, it is your responsibility.  If expenses, taxes, fees, regulations increase it is your responsibility.  After the sale of the business while on the airplane flying home I experienced  a difference that almost seemed inside me at a “cellular level”.

The concerns I had for my 20 plus employees and 5000+ customers that I carried with me for 20 years were gone.  I felt I had done my due diligence, worked closely with my CPA , attorney and advisors, found the right buyer to address my goals as a seller and I was leaving my former employees, customers, and responsibilities in good hands.  I certainly did not absolve myself of all my responsibilities, and recognized problems could still surface, but I did experience a feeling I hadn’t had in 20 years.