What Happened to my Deal?

Deal KillerDeals can die for many reasons, but “Time” is the worst reason of all! It’s possible to manage, yet also easy to let Time take control.

Let’s say I have a buyer, Bob, who is taking his time getting due diligence done. He has a process – no problem. However, as he completes his due diligence, it is revealed that he hasn’t proceeded with the bank loan application.

Well, the bank takes their process seriously too. Their loan committee meets every two weeks and the next meeting is in two or three days.  The banker doesn’t see any way to have Bob’s request in time – so he will present at the following loan meeting two weeks out. Remember, Bob is not his only potential client. Now, let’s add to the mix the SBA, a buyer’s attorney, insurance agent, accountant, financial planner to access his 401k, and oh yes, the landlord. The deal can linger for months with very little actually getting done.

All of Bob’s advisors have their existing clients plus other business to handle and he needs to fit into their schedule (and they can’t always jump at his request). After 4 months of following a process and scheduling the time to meet with advisors, the deal is starting to unravel.

The seller interprets the delay as a problem with the buyer. The buyer must be “weak” financially, unable to manage a business, or maybe the buyer isn’t really serious. Although this isn’t an accurate view, this is the seller’s perception. The seller starts to look for other buyers as the negotiations grind to a halt. This is known as “Deal Fatigue”. It happens all the time and it can be easily avoided. Well, not easily. It does take time, work, and effort. But that’s business!

Control Time by showing urgency and impart that urgency upon your advisors and others involved in the deal. Set due dates and follow up. Be a leader of the process. Follow these general steps:

  • First, due diligence and bank loans should be happening at the same time. Meet with several banks – immediately!
  • Second, gather information needed for insurance, licenses, etc. while the loan is in process.
  • Third, when you have positive feedback from your lender, begin to negotiate terms of the buy-sell agreement. The attorneys will document what you have agreed to and will advise on technical points. While you are actively working the process, do you have access to your down payment?

These steps are worked concurrently, not consecutively. By the way, don’t quit your job until you know the deal is going to close!

Stay in close contact with your Apex Business Advisor through the process. Your Advisor can assist with the communication and follow up with banks, attorneys, and the seller. Keeping lines of communication open is critical for getting to the closing table!

Doug Hubler

The First Step in Research

HamsterOpportunities can disappear in a blink of the eye!  Engaging in business acquisitions requires buyers to act quickly and assertively. There is quite a bit of activity in the market with many buyers looking for businesses to purchase. The best businesses go fast! If you have been looking at businesses for a few months, or years, you know when good businesses become available.

But potential business buyers repeatedly miss out on deals because they hesitate, want to do all their research up front, want to talk to bankers, industry associations, or do other things that keep them from making a decision. By the time they start to get comfortable with the opportunity, the business is already under contract. This happens time and time again. Don’t do the research hamster wheel.

The first research step should be meeting with the seller. What better way to find out about the business and industry! There will be plenty of time to thoroughly examine the company after the meeting, and the research will most likely be much more efficient.

Why do tons of analysis on a company, meet with advisors and then decide not to move forward after interviewing the seller? Another advantage to meeting with the seller prior to conducting time-consuming research is that he or she could potentially give clues as to what a buyer should be reviewing.

Don’t miss out on that deal that you’ve been waiting for!  Talk to your Apex Business Advisor for more information on buying or selling a business.

Doug Hubler

Status Quo or Something Better?

Quote4Did I just catch you daydreaming of a better life? Were you thinking about your sucky job? Or have you already been laid off and are searching for a much more secure future for you and your family?

Have you thought about buying a business?

There are some things to think about when comparing holding down a job vs. leading your own business:

What are your real passions, goals, desires? Are they currently being met with your job?

  • Are you entrepreneurial but restricted by your job description?
  • Do you go to meetings to plan other meetings? Feel like your days are wasted?
  • What decision making control do you have vs. how much do you want (and deserve)?
  • Are you fulfilled in your work? Are you being challenged?
  • Are you reaching your full potential?
  • Are you properly compensated for the true value you provide your employer?
  • How much flexibility do you have in your job vs. how much you want or need?
  • Is your future secure?

If you are reading this, you may have already been considering buying a business or at least are on the fence. If you are on the fence then you most likely are not fulfilled with your current job or your prospects. Maybe it’s time to take control of your life.

Owning a business doesn’t mean life is suddenly wonderful and you will be immediately successful. However, business ownership provides the opportunity to combine your talents and motivation to reach the level of success desired.

Talk to an Apex Business Advisor and take control of your future by acquiring a fabulous business!

Invitation coming….Be looking for an invitation to register for the February Basic Buyer Process Seminar which will be held on the 25th.

Doug Hubler

He Who Hesitates is Lost

weirdstoplightThis is an old Chinese proverb. Or He Who Hesitates, Regrets. An Albanian Proverb.  Either way works in the business broker world. We see hesitation with buyers and sellers every day. Whether Buying a Business or Selling a Business, either party can ask the same questions – Is this the best or right price for the business? Will there be a better opportunity next week? Am I doing the right thing? I’ve gotten three opinions, should I get three more?

When you operate your business, or make decisions in your job, hesitation can often be costly. One of the benefits of owning your own business is that you can make all the final decisions and you can make them quickly, without going to committee.

Many people leave the corporate world for this reason alone. How many times have you said, “Boy, if I could run this business and make decisions without all these meetings, I could double revenue” or something on the same theme?

Here are some examples of recent regrets that our Kansas City Business Brokers have witnessed:

  • Seller was presented with two good offers within the last year. Both were declined as insufficient. The business is now in bankruptcy because the seller’s health is failing and he is not able to tend to the business.
  • Buyer A wanted to make an offer on a business but wanted to complete due diligence first. The seller balked at providing further detailed information without an offer. Buyer B quickly submitted an acceptable offer with a contingency for completing due diligence and is currently on his way to the closing table.
  • A buyer wanted to make an offer on a business but decided to wait until kids were back in school after spring break. The business sold while he was in town – at home.

These are real regrets and real pains. It’s understandable that someone wants to make the right decision. However, we see the deal-killing results of analysis paralysis every day. In the end, those who have the ability to be decisive within a short time frame are usually the most successful at making it to the closing table with a satisfactory deal.

We at Apex Business Advisors are here to help with your business transition. Contact one of our Business Advisors for a free consultation.

Doug Hubler

Low Ball Offers

Low Ball Offers2There are various ways to go about buying a business, but all of them require making a deal with the current owner. As mentioned in prior blogs, before a deal can move forward, a written offer needs to be presented. Keep in mind that offers are based on information supplied from the seller to buyer at this point and more information is probably forthcoming with an accepted offer.

A seller needs to feel comfortable with the person who is interested in taking over their business (their baby), and a relationship needs to develop between buyer and seller during the process. For a strong relationship to be maintained there needs to be fair give and take during negotiation.  Negotiation is expected.

A proper offer needs to be made unless the buyer just wants to play hard-ball and present a low-ball offer. Most sellers of good businesses are not desperate and may have multiple interested parties. A low-ball offer will most likely offend the seller and could compromise any future communication between the parties.

There are times when low-ball offers seem to make sense, e.g., the IRS has shut down the business, bankruptcy is at hand, or there is only one customer and future business is at risk.  Otherwise, be reasonable and success will follow.  If a buyer feels the business is way overpriced, there could be some missing information.  The buyer should discuss pricing concerns with the broker before making an offer.

Please discuss any questions you have about buying or selling a business with your Apex Business Advisor.

Doug Hubler

Buying A Business Requires Financial Readiness

OrderlyRecordsBuying a Business is a process. Much like a business owner preparing a business for sale, buyers also have to plan ahead for an acquisition.

Besides focusing on the right type of business to match background and personality, the business also has to be the right size for the buyer. There needs to be enough income to meet personal and family needs while still having enough cash flow to support debt and working capital requirements of the ongoing business.

If the business is too big for the buyer’s pocketbook, there will probably be too much debt, which in turn will stress the working capital and personal needs part of the equation.

Once the right business is found and the seller has accepted the buyer’s offer (we are optimistic), the banking process starts. Getting an acquisition loan from a bank will require a buyer to be completely open with their financial situation. The bank will also be assessing the buyer’s background and the fit with the business, and evaluating the financial history of both buyer and seller.

Buyers will have to submit a detailed list of investments, liquid assets, and real estate that will be used as a down payment and collateral. Also, the buyer will have to submit proof of income in the form of tax returns, check stubs, bank statements, etc. This piece of the process isn’t difficult if you have good records. So have your financial house in order before hunting for a business.

Apex Business Advisors holds monthly “Buying A Business” seminars, so if you are interested in more information, contact your Apex Business Advisor.

The First Step – Make an Offer

Take the First StepThe “buyer” seminar that we held this week was very informative – again. (Anyone interested in how deals are done may attend these seminars.) One of our local experts explained the importance of following a process to get to the finish line. Getting a deal completed requires both the buyer and seller to move along with determination and to be able to share information openly.

Although the focus in this seminar was on due diligence, Jennifer Peek, CPA stated that the first step in the process is to make an offer. Without an offer, a seller will be very reluctant to share too much information too soon:

  • for fear confidential information may be used to compete against the business,
  • the information could get into the public domain without being controlled or filtered,
  • and sellers want to make sure they are dealing with a serious and qualified buyer.

Making an offer is fairly simple and carries very little risk for a buyer. At Apex, our offer contracts allow for many contingencies that would relieve the buyer of further obligation. Having an offer on the table allows the buyer to seek financing options and to start researching alternatives for insurance or professional services.

Our Apex Business Advisors can answer your questions about buying and selling a business. Please give us a call.

Doug Hubler

Why use an Acquisition Search Program to Buy a Business?

Watch the video to find out more about our Buyer Search Program and the benefits of having a broker working for you.

Top 5 Reasons to be Your Own Boss

Top5#1 Build something of Value
If you work for a company for 30 years and have an impact on that business that created value, how much of that value do you receive upon retirement? None!  Put your efforts into your own business to create wealth for you and your trusted employees; then sell it to someone that can carry the legacy forward.

#2 Control your destiny
Many people have felt cheated by spending decades working for a company with the expectation of retiring and getting a pension. Those days are mostly gone. Pensions are disappearing. There is no loyalty to employees by their big company employer. How many people do you know who have been laid off? Way too many. Take control by being your own boss.

#3 Work toward a horizon with no limits
Being a business owner allows you the flexibility to do what you want. The key here is the ability to dream big and not be limited by a boss or company rules. Many bosses are threatened by someone on their team who is a dreamer, someone who has vision and wants more. As your own boss, there are no limits. No one to say you’ve maxed out your commission or bonus for the year (even though it’s only July!) Maybe you want to buy a second company!

#4 Call your own shots
As a business owner you can decide the direction of your business. Day to day decisions are yours – no long, unproductive meetings to plan the next meeting. You can call the shots right now, today, or tomorrow. It’s completely up to you. You may want to put more thought into a given opportunity or you may decide to jump at the opportunity and go by your gut. It’s up to you!

#5 Keep the fruit of your labor
All that cash you were creating for your employer will now be yours! There are many legitimate tax benefits to running your own business. You can use the proceeds to expand, or you can buy that toy that you have always wanted. Heck, give yourself a bonus today!

Call your Apex Business Advisor to talk about how you can be your own boss.