Business Buyer Education



Business Buyer Education Top 3 Tips

 by 
So with the uptick in activity in business sales at the middle market level so too has the uptick of buyer inquiries. A shocking statistic for all is that 90% of buyer contacts that reach out to inquire on listings never pull the trigger. That my friends is a massive number and one that deserves some exploration.
There is little empirical data studying the activity of buyers but we do know the following from interviews and observations.
1. Buyers are generally un-educated regarding the terms, process and marketplace dynamics, seller expectations, and financing realities.
2. Fear plays a huge part in mitigating the ability of buyers to “pull the trigger”.
3. Financing
EDUCATION: Lets start with #1 and naturally its the most important. Anyone contemplating the purchase of a business needs to understand the playing field they are on. It is normal and natural for a person to bring the knowledge and experience from prior lives to the table but in reality at the main street level little to nothing will prepare you for what you are about to do. In short “Know what you don’t Know” and get educated…. use multiple sources not just a book or friend….look for educators and support persons who have been in the trenches and been tested by fire. The Goal is to be Wise ….not technically smart about the process and deal you are about to do.
FEAR: Fear is driven in large part by the unknown…..take care of #1 and we address a large part of number 2. That being said it will not go away…it should be embraced as the thing that helps you be cautious and careful.. But identify your greatest 2 or 3 fears in the process and talk them out and address them. Realize they will not go away ……ever. If you cant deal with that don’t do this process
FINANCING: This ties up in number 1. Get comfortable that the lending process if it even applies is brutal here and very much one sided to the bank. Also get comfortable with the fact that most deals wont qualify for a bank financing. Small business operates in a different world and as a business owner you will sign on the line for everything…in essence live on the edge. Get comfortable with that fact and know the financing tools that are available in your price range.
For more on this and other topics visit www.yourfloridabusinessbroker.com

Comments

Post a Comment

Popular posts from this blog

Buy An Existing Business or Start From Scratch? Which To Choose?

Image
Buy An Existing Business or Start from Scratch? December 21, 2018  by  Michael Shea PA So you want to own a business. The freedom, autonomy, and rewards are attractive. So where do you start? You can start a  side hustle , buy a  franchise , or buy an  existing business.  With so many options available to you how do you know which to choose and what are the pros and cons? As a broker, I have seen each of these options play out both positively and negatively.  The side hustle allows you to hedge risk and make some money “on the side” but the time it takes to scale to actual “business” status is long.  Franchises bring proven processes, resources, and often brand power.  It requires more capital and you need to be comfortable with the restrictions and ongoing costs associated with being in “partnership” with a master franchisor. Finally, the one I think represents the best opportunity on many levels is the purchase of an existing business...
Read more

Rules of Thumb are for the Birds

Image
Rules of Thumb are for the birds October 11, 2015  by  Michael Shea PA   (Edit) In the world of small business sales and mergers and acquisitions every buyer thinks every business is overpriced and every seller thinks its worth more than what you tell them. Over the years “industry experts” of which I am apparently one, bandy about “rules of thumb”. In other words….business X sells at 2 x cash flow or 70% of sales etc etc etc. I recently had a broker call me up and tell me that a business was overpriced (not her job) and that the proper valuation method was a $ value per customer. Oddly enough a month prior she had a different position entirely (#notethesarcasm). Valuation is an art and there is data to support proper pricing. But in simplest terms there is not one method that is correct; however sellers need to be particularly cognizant of market dynamics like supply and demand and inventory levels. Yes even in small business sale and mergers when inventory...
Read more

Confidentiality in the Business Sale and Why is it so Important

Image
A close up of the tab from a confidential file folder. When you are buying or selling a business confidentiality is one of the most important factors.  Now to the novice negotiator, buyer or seller with a lack of experience or understanding of all the things that can go wrong you may find that odd but let me explain. First….the sale of a business is a private matter and the only people who should be involved are those necessary: Buyer, Seller,  Broker  if there is one,  CPA’s , and  Legal Counsel .  That’s it.  No one else has a need to know.  As a seller who spends a lot of time with employees, there is often some emotion and misguided feelings of emotion/loyalty borne out of concern for your staff. But I would charge that to be misguided.  Here is how sellers should look at the deal:  Employees should be focused on their job and job alone.  The sale is to be handled by the players hired to manage the transaction.  Any tim...
Read more