For those in the market to buy a business, the best opportunities are snapped up quickly, and many businesses for sale languish.

That’s the insight of Don Imbus, a Tampa-based agent at American Business Brokers, a firm based in Fort Myers with a Tampa Bay focus.

Imbus shared median Business Brokers of Florida data for 2022 and 2023. That means many businesses in the data are very small (one or two employees), but a few are much larger and sell in the $20 million to $30 million range.

Deal volume dropped in 2023, possibly attributable to for-sale businesses with many red flags, trending poorly and un profitable, or having difficulty acquiring financing.

“Transactions are down, and there’s always a lot of complaints from buyers about what they call trash on the market — businesses that aren’t worth buying,” he said. “Finding a good business to buy was always challenging, and it’s becoming increasingly so.”

Tampa Bay business sale activity

From 2022 to May 2, 2024:

On paper, the economy seems strong, but for a small business owner, challenges abound around higher labor costs, Florida’s increases in its minimum wage, and the cost of fuel and other raw materials and inputs have gone up.

“There’s a lot of desperation out there right now with business owners, and it can be easier to fi nd listings, but they aren’t necessarily of great quality,” he said. “They can’t necessarily increase pricing to compensate for that because consumers face inflation challenges.”

That is putting business owners in a real pinch, especially restaurant owners. Restaurants are always the No. 1 category but it’s tough to make them profitable, Imbus said.

“There’s a lot of them opening, but there’s a lot of them closing or selling.”

Strong businesses go under contract quickly. Weaker performers, not so much.

“They could languish for a year or a year and a half. Maybe they never sell,” he said.

Small business value misperceptions

Small business owners often ask Imbus what he thinks their business is worth. They often share with him that they believe it’s worth three to five times their revenue.

“I go, ‘Oh no, no, it might be three times your profitability and certainly not times your revenue, but it might even be lower than that,'” he said. “Reality sets in, and they say, ‘Oh, I didn’t realize that it was worth so little.'” Buyers are buying cash flow, and the value will be some multiple on profitability, he said.

The post Small business brokerage snapshot shows a challenged marketplace appeared first on American Business Brokers.

1) So Long Covid: The Covid-19 pandemic is expected to subside by late summer as the vaccine is distributed. This instills higher confidence for business Buyers in 2021. Buyers and Lenders/Appraisers are increasingly ignoring 2020 in their valuations so long as the business is back to pre-pandemic revenue and profits. Owners who survived the recession in 2008, and the pandemic in 2020 are ready to cash out in 2021.

2) Lower Volatility: The elections have been decided, thus reducing the risk that Buyer’s perceive thanks to a more “predictable” political and business climate.

3) Great ROI: Investors know that buying a small business has a greater return than most other investments now, and it’s very cheap to borrow funds and leverage their money.

4) Low Taxes, For Now: Taxes are expected to rise in 2022 on personal income, business profits, and the proceeds of business sales, thus making 2021 the best time for Sellers to cash out if they are anticipating retirement in the next 3-5 years.

5) Active Buyers: Buyers are traditionally most active during the first quarter of the year. There also are a large number of new buyers who have recently departed the ‘corporate’ world.

6) Seller’s Market: There is a very low inventory of quality businesses for sale. Those that are listed are receiving considerable Buyer attention, short time on market, and often list price.

7) Sell High!: Surviving businesses are likely to see higher revenues in 2021 as consumers release their pent up demand, spending their money on the now-fewer goods & services providers. If your business is unaffected by the pandemic, or is roaring back afterward, that’s exactly what Buyers are seeking!

8) Buyers get Fees and 6 Months Payments – FREE! with an SBA 7(a) Loan: The CARES Act has been extended, which gives existing and new SBA 7(a) borrowers FREE FEES and SIX MONTHS of FREE PAYMENTS. This is an unprecedented and powerful motivator for Buyers to complete a business acquisition now!

https://www.sba.gov/article/2021/jan/10/sba-extends-crucial-lifeline-borrowers-impacted-covid-19-debt-relief

The post 8 Reasons why 2021 is the BEST YEAR for both Buyers and Sellers of small businesses appeared first on American Business Brokers.

Most Business Brokers run when they hear this, but I am not a typical broker. When I hear that a sale is a few years down the road, it is music to my ears. It gives me the opportunity to help a business owner maximize her or his proceeds down the road when they do finally sell.

I offer a variety of complimentary services to business owner’s who are nearing an exit with their business.

Here is my 7-step plan to maximize your proceeds:

1. Establish the Baseline Value of Your Business Today

Realistic expectations about the value of your business are a crucial element of having a successful transaction. What’s your business worth? Ask me to complete a valuation and let’s see what it would bring if sold today. If it’s not the number you had in mind, there is still time to improve the value. I can provide guidance on what needs to be addressed between now, and sale time.

2. Benchmark Your Business vs. Similar Businesses

How does your business compare to similar businesses? When I was a business owner, I wish I knew about the resources that a Business Broker has available. Reviewing your results versus other in the industry is eye opening, and can help you focus on your goals. Here are a few of the benchmarking tools I can provide:
– Sale Comps
– Listing Comps
– Business Reference Guide (Expert Insight about your industry)

3. Meet With Your Broker Annually

Meet with me each year after the initial valuation to review results of your year, update the valuation, and establish this year’s goals.

4. Eliminate Red Flags

Here are just a few examples of issues that can red flag your business in the eyes of a buyer or buyer’s lender. I can review your business and identify these so that you have time to make them a non-issue before the sale.

– Marketability
Let’s review sales of similar businesses to be sure your business is desirable to buyers. If it’s not, we’ll discuss a plan to improve it’s marketability

– Exit / Succession Plan
If something were to happen to you suddenly, would your business survive? If the answer is “no”, then we need to talk about a succession plan.

– Everything On The Books
In the last three tax years prior to a sale, be sure all of your income and expenses are on the books. Saving a nickel now can cost you a quarter when you sell.

– Limit Excessive Personal Benefits Expenses
Buyer’s gravitate to “clean deals”. If there are too many footnotes and “add backs” in your Financial Recasting, it’s going to be a much harder sell.

5. Understanding Net Proceeds and Your Tax Situation

Discuss the future sale with your Financial Planner, Accountant, and/or Attorney so that there are no surprises. Different legal entities are taxed in different ways when they are sold. If you need a certain “net proceeds’ when you sell, it’s best to understand what will drive that value long before the sale so that you can prepare accordingly.

6. Maximize “Owner’s Benefit” and Revenue

Buyers and lenders typically look at three years of business tax returns when they are valuating your business, and the final year is the most important. You will want to maximize your “Owner’s Benefit” leading up to the listing. Let’s examine strategies to do this.

7. Sell High

“I can’t sell now, I’m making too much money!” Is it wise to wait until you are not? Like any asset, you want to sell high, when it is most desirable to a buyer. We can discuss what internal and external factors affect your industry, seasonality, cyclicality, elections, and other factors that can influence your sale timing.

Contact me today and let’s make an appointment to discuss how I can maximize your net proceeds on a future sale of your business.

The post Preparing for Your Exit: 7-Steps to take NOW for a Future Sale appeared first on American Business Brokers.

Some brokers will take your listing, and then it seems you never hear from them again. Well, they’ll call you for price reductions or renewals. Maybe they are working behind the scenes, or maybe not. I know that it can be frustrating to wonder what is happening when you are motivated to get your business sold.

But I’m not an ordinary broker. I’m an expert. That’s what you are paying for, and that’s what you will receive! That is why I stay organized, and on top of my communications with you.

You’ll never wonder what I am doing to get you to a closing, because you’re going to hear from me every step of the way. You might hear from me too much! I will be in regular communication throughout the entire marketing and deal process. I’m going to be in contact to discuss what’s happening, why it’s happening, and how to keep it moving along.

While I do most of the heavy lifting, I also understand that selling your business takes some teamwork. No one knows your business and why it is unique better than you. Through regular communication, I will keep the marketing for your business positioned right out in front to attract the best possible buyers, as quickly as possible.

During buyer management, I’ll let you know who is taking a look, and what I am doing to move them through initial discovery, and towards an offer. When offers are received, I’ll be in close contact to strategize the best response, with the goal of getting a solid buyer under contract. Weekly or bi-weekly updates are common during this phase of the sale process.

Due Diligence and preparation for closing is a busy time, and there is a lot to do for the seller, the buyer, and others. I will be there pulling the strings to keep the entire process and all the actors on track and on time. And, I’ll be there to answer your questions and explain how I am expertly guiding your deal towards the closing table. Expect communications almost daily during this final period.

Pre-closing, closing, and transition move by quickly, and I will be with you the whole way, preventing or mitigating any last-minute issues to make your deal successful.

I’ll Get it Sold

Successfully selling a small privately-held business is like baking an award-winning chocolate cake. To realize a truly exceptional outcome, you must have a great baker, the highest quality ingredients, and a superior process. Afterall, if you are going to spend all the time and trouble, why not make the most out of it?

Your business is a valuable investment asset. Selling your business provides critical capital for your retirement or other goals, and I only have one shot at maximizing the outcome for you. I provide the expertise and process, while you and your business must be ready as well.

That is why, unlike many brokers, I am very selective about the listings that I take.

My buyers are looking for the best businesses to buy, and willing to pay top dollar when they find them. They want desirable business segments, motivated sellers, a realistic valuation, good books, a motivated staff, diverse customer base, robust policies and procedures, and the rest of the house in order. Anything less, and the seller, buyers, broker, and a host of others will spend a lot of time and effort, but never get to the closing table.

If your business sounds like the one described above, then you have done great work as an owner! Congratulations on your accomplishment. I have a very high likelihood of getting your business sold, in a reasonable amount of time, at the best market price, and get you on to your next adventure!

If your business doesn’t sound like this, that is okay as well. I will provide you with a complimentary consultation and valuation for your business, and provide you with the benchmarking and suggestions so that you know which priorities need some attention. Then, I’ll stay in touch, update the valuation annually, and revisit your progress. Working with you over time, I will get your business in shape to maximize its value. When you are ready to pull the trigger, I will go to work to get it sold for you.

Will your business make the cut? Either way, you win. You are in good hands with my expert advice and professional process.

Is Hiring an Expert Worth the Cost? You Bet I Am!

Transacting a small privately-held businesses is a complicated process. It requires considerable training, experience, and skill in a variety of disciplines to get the job done quickly, for the maximum value, and with the least amount of stress for the seller.

If you are considering managing the sale on your own, consider the following:

• There can be more than a hundred steps in the deal flow, even in relatively simple transactions. Do you have the expertise to identify and manage them all?
• Business owners typically wear a lot of hats, and dedicate countless hours to their businesses. Selling your business is a substantial project. While complexity varies with the business, the typical process requires several hundred hours of effort over the period of a few months’ time. That is a full-time job in and of itself! Is this the best use of your time? Will you be able to complete this project efficiently? What is your time worth? Is there a lost opportunity cost elsewhere if you spend your time this way?
• Most “Main Street” sized transactions are completed in less than one year. But mistakes in the process can be costly and send you back to the beginning. What is your time frame to complete the sale? Do you know the pitfalls and how to avoid them?
• A typical successful sale requires about 50 buyer prospects to find the right one who will maximize your proceeds. Do you have access to enough quality buyers?
• Most buyers use an SBA loan to finance the purchase of a business. A number of buyers seek an immigration Visa to the United States in connection with the purchase of a small business. Do you have the expertise to work with these buyers or point them in the right direction? Or will you have to turn away these potential buyers?
• Managing Buyers is an art form and requires dispassionate expertise. It can be very difficult for a seller to manage their own buyers. Buyers will take full advantage of a seller’s passion for the business deal and use it to their advantage. Can you negotiate a deal as effectively as an expert third party can?
• There are a number of transaction related Contracts required during a deal. I have these lawyer-reviewed contract templates already. What will it cost for you to find or develop these contracts on your own?
• Valuation based on comparable sales for small privately held businesses is a task for which I am an expert. Where necessary, I can back up the price with data to get buyers comfortable and committed. Do you know what your business is worth, and do you have data to support it? If not, buyers will use this against an unprepared seller. Don’t leave money on the table when you negotiate your deal.

Successful business owners are very talented people, to be sure, but they also recognize when a job calls for a specialist.

I’ll show you the entire process and why hiring a professional business intermediary expert will put more money in your pocket at closing than selling the business yourself. And if I am not successful in bringing your transaction to a successful closing, then no fee is paid.

The post I’m Different! Here’s Why appeared first on American Business Brokers.

Market Value

While we can establish any “market price” that we want, the consideration paid for a business transaction that closes is the market value, as negotiated between a buyer and a seller. Buyers these days are sophisticated, and have considerable information available to them. Be assured that they will do considerable research and compare the value of your business to others that have similar performance. Often, they are guided by a professional Business Intermediary themselves.

The law of substitution is a guiding principle in the purchase of business opportunities, as it is with all other investments. Buyers have many choices, and they are unwilling to pay more for a business than comparable sales would warrant.

My Business is Different

With a few exceptions, businesses are very unique. It is relatively easy to point out why a given sales comparable is different than the target business. However, the consideration that buyers pay in a typical purchase of assets + goodwill is the future expectation of cash flow. This future expectation of cash flow is primarily based upon recent historical financial performance, which acts as the common language for business value. The differences in the business has been part of its success, and that success is already reflected in the financial performance. The unique qualities of the business do serve another purpose: all other things being equal, these advantages often create a strong connection for the buyer and lead to better offers and quicker sales than businesses that have less to offer.

Paying for Potential

Business Intermediaries spend a considerable amount of time helping to educate buyers and sellers about the valuation and deal process. One topic that is frequently discussed is the future potential of the business, how much can it grow, and what are the mechanisms for that growth. It is critical that this growth potential can be demonstrated to buyers for a successful transaction. Once a transaction is completed, though, buyers must spend considerable resources of time, money, and talent to realize and be rewarded for that growth in the business. While future growth potential is a necessary ingredient for a business, it isn’t something for which a buyer will pay a seller.

There are a lot of factors that go into the timing of a business sale. If there is low hanging fruit in the growth potential of a business, and the seller has the time and other resources to harvest that success, then it may be appropriate to do so. This growth will add to the valuation of the business in accordance with the valuation multiple. Business Intermediaries are great resources for helping business owners plan for a future exit from the business, while taking steps now to maximize its value.

Years of Hard Work!

Sellers sometimes feel exasperated about the value of their business, given the many years of hard work equity that they have invested in the business. But recall that your business provided many years of income to you and your family, maybe even a lifetime of income. And your income and quality of life as a business owner were probably far better than those with merely a job. Additionally, when you sell your business, you will receive a lump payment and/or payment stream that is quite significant, may last for several years, and requires no additional work. Very few people with a job exit with such a payout as this.

From a buyer’s perspective, the investment in a business is also significant, and may represent several years of hard work “for free” before they are able to recoup their investment. Additionally, a buyer assumes all future risks of a business once purchased, included internal as well as external factors that may affect the financial performance. Thus, the market value paid for a business is a balancing act, and a true representation of the forces of supply and demand for that type of investment.

Maximize value by using a Business Intermediary

If a seller does not use a Business Intermediary, then the net proceeds to the seller automatically go up by the amount of the brokerage commission, right? Sales data does not support this for business sales, and in much the same way that this logic does not work for the sale of numerous other types of assets. Hiring and expert gets the transaction completed for a higher price, less cost, fewer (if any) mistakes, and considerably faster.

It’s Not an Appraisal, It’s a Valuation

Business Intermediaries generally are not interested in an Appraised Value for a business, are not fully trained in Appraisal methods, and are not licensed to perform Appraisals. This formal process is left to Certified Business Appraisers who perform their work for lawyers, lenders, and courts. This is a time consuming and expensive process, and goes well beyond the scope of what a Business Intermediary is trying to accomplish.

Business Intermediaries are trained in a more simplified valuation approach called the Direct Market Data Method. This is a fancy way of saying that comparable sales transaction data is studied to determine the underlying valuation multiples for a give business segment, size, and location, and then applied to the target business’s financial metrics to arrive at a Most Probable Sell Price (MPSP). We use the MPSP to arrive at an Asking Price. Once the Asking Price is advertised in the market, buyers and sellers then arrive at the final market value through negotiation.

But I Heard It’s Worth This Multiplier

In the field of business valuation, there are many different multiples used to calculate value. Common multiples used are for Revenue, Owner’s Benefit (also known as Seller’s Discretionary Earnings or Adjust Net Income), EBITDA, and EBIT. All of these multiples have a different value because they are applied to different metrics of the business’s financial performance. Of course, the multiples are also different for various business segments, and even different sized businesses within the same segment.

Sellers have often heard of some multiple number that has stuck in their mind, but apply it to the wrong metric, segment, or business size. Unfortunately, this may lead to a false belief in what the valuation for the business, and even to unrealistic price expectations that prevent the business from being sold at all.

The best way to understand the value of the business is not to guess, but have a professional valuation completed by a Business Intermediary. Furthermore, ask the Business Intermediary to show you which sales comparable data was used, how the multiples were selected and what is the level of variation in that data set, how the finances of the business were recast to arrive at the appropriate metrics, how the sell prices were calculated, and how those various values were reconciled to a single Most Probable Sell Price (MPSP.)

If the process used was robust and appropriate, then a seller can be confident that the MPSP is an accurate reflection of the market value for the business.

Put the Shoe on the Other Foot

Business owners are smart, savvy people. They frequently use their experience and reason to calculate whether an investment is a fair value. When the seller of a business is considering the appropriate value of that business, think like a buyer instead. How would they view the business if they were a buyer considering an investment in the business? What time horizon would they expect to recoup their investment? What are the risks associated with the business that could affect its future financial performance? What changes could be made that would positively impact the value? If an owner can step outside their present relationship with the business momentarily, thinking like a buyer will give them a much better sense for how the market will value that business opportunity.

Business owners make better decisions when they have better data. When it comes to selling a business, contact an expert Business Intermediary to complete a valuation. They will point out what does and does not drive value for the business, based on actual market data, so that a pricing decision can be made with better precision. Being confident and realistic about the Most Probable Sell Price will make it much more likely that a successful sale will be completed.

The post What’s My Business Worth? appeared first on American Business Brokers.

Why So Shy?

A few owners still ask, “Why keep the sale such a secret? We want to find buyers, right?” Most assets that are sold, a used car for example, don’t need to be kept confidential, and in fact, need to be broadcast widely to find buyers. But your business is your livelihood, and letting people know that it is for sale can have negative consequences for a number of your stakeholders.

• Employees – Most of them are just fine after a sale. Afterall, your professional and knowledgeable staff are part of the reason your business has value, and attracts buyers in the first place. But employees fear change and the unknown. If they know that a sale is in the works, they may take the time to find new employment. Rather, when they are presented with a new owner, they will generally give the new owner the benefit of the doubt and stay with the business.
• Vendors – Vendors are your unofficial partners in your business. They provide products and services, but they also provide stability and credit. Knowing a business is for sale could impact that availability and credit, so it’s best to let them know only when absolutely necessary, late in Due Diligence, or even right after the closing. Also, vendors are in contact with your competitors, so we want to keep them in the dark to prevent any inadvertent disclosures that may precipitate a competitive reaction.
• Customers – Change is often good for your customers. New owners bring new ideas, new vision, new capital, and other benefits. Customers are people too, so they have fears about change. We don’t want them to have any reason to defect during this critical time in the life of the business. Wait until after closing, and let the buyer decide how to market the change of ownership.
• Competitors – Obviously, you don’t want your competitors to know about your sale, as they may respond in the market in ways that are detrimental to your revenue, and all of your other stakeholder groups above.
• Failure to Sell – For a variety of reasons, sometimes a business for sale does not consummate a closing transaction. If your stakeholders knew about the sale intent, relations can become awkward if the sale is not completed. During the sale process, Business Intermediaries advise their Sellers to continue to operate the business as a Going Concern. If a sale does not occur, the owner is still moving the business forward to ensure their livelihood and those of the other stakeholders.
• For Sale by Owner – If you are considering selling your business on your own, how will you market your business, manage buyers, and conduct the transaction while preventing inadvertent disclosures to any of the stakeholders above?

For the reasons above, confidentiality is part of my DNA, and here’s how I maintain it throughout the process.

• Initial Contact

As a Business Intermediary, I don’t have any fancy company shirts with my company name and logo embroidered.  How would I explain that to your receptionist? I also don’t announce my company, or leave messages announcing my company, at your business except when I know that I am speaking to the owner.

• Meeting with Prospect Sellers

My appointment requests will address confidentiality. I will typically suggest meeting with the owner after hours, at a remote location like a coffee shop, or only at the business if an owner is comfortable that my identity and our discussions can be kept private.

• Receipt of Sensitive Financial Documents

In my initial contact, my goal is to get to know the owner and his or her motivations, and begin to learn about the business, it’s market, and its financial performance. I will be requesting some very sensitive documents such as tax returns and income statements. While I only use these documents to consult with the owner and provide a valuation for the business, I recognize that some owners require assurance of confidentiality.  I am more than willing to provide a Non-Disclosure Agreement to the owner in exchange for a review of these documents.

• Marketing the Business

How does a Business Intermediary market a business without disclosing its identity? While I prepare and circulate a Business Listing Information (BLI) page for the business, any identifying information is redacted or altered.  I describe the business in general terms, while avoiding specificity regarding location and product brands.  There are no business names, addresses, websites, phone numbers, owner names, photos, or any other methods for positive identification included in the BLI or Listings that I publish to prospect buyers.

• Qualifying Buyers

Once a buyer has reviewed generic information about the business, and expresses an interest in learning more, they must undergo a qualification process that the Seller and Broker have agreed upon. This includes, at a minimum, signing a Non-Disclosure Agreement, such that the buyer agrees not to disclose the identity of the business, the fact that it is for sale, or any of the financial information for which they become aware. It also typically requires that a buyer provide his/her background, via a resume, profile questionnaire, or LinkedIn profile, that demonstrates that they have a background suitable and necessary to operate the business successfully. A buyer is also often required to provide some form of financial disclosure indicating that they have the wherewithal to purchase the business, or at least fund the likely down payment and upfront costs. There may be other general or specific qualifications that a seller requires of potential buyers. All of these elements must be satisfactorily met before the Business Intermediary will share the Confidential Business Review (CBR) that has been prepared for the business with a buyer. Without meeting these requirements, a buyer is likely going to waste the time of all parties involved, and perhaps put the business at risk of inadvertent disclosures of confidential information.

• Buyer Walk Through

Upon inspection of the CBR, a buyer may request a teleconference call with the seller or an on-site visit to gain additional information, inspect the assets, or see the operations of the business. These activities are strictly arranged by the Business Intermediary so that they will be handled in a confidential manner. Buyers are not permitted to perform their own “scouting” or “secret shopping.” Any on-site visits are typically handled after hours. In some instances, it is appropriate to show buyers the business during operational hours, and in these cases, the buyer is coached on how to conduct themselves, and the innocuous alias they are assuming during the visit, such as “insurance inspector” or “banker”, etc. In this way, stakeholders of the business have no suspicion about the nature of the visitor, and thus, confidentiality is maintained.

• Loose Lips Sink Ships

As Business Intermediaries, I don’t talk about listings with anyone who is not involved in the deal process; not our wives, not our friends, and not even co-workers who don’t have a need to know. It is a wise decision that sellers keep their disclosures to a minimum as well. Before disclosing your sale intentions with anyone beyond your spouse, partners, and professional advisors, it is best to discuss the pros and cons of any other planned disclosure with me as your Business Intermediary. Together, consider if the disclosure is absolutely necessary, does it bring any value to the deal process, and are there any risks involved. If the disclosure is necessary, discuss when is the right time to do it, and typically, the later the better.

Confidentiality is similarly maintained throughout the due diligence and closing process. In preparation for the closing, the buyer, often with seller’s input, will decide a strategy for how and when to inform the stakeholders of the business about the change in ownership, including employees, customers, vendors, and others. The buyer will be responsible for immediately instilling their vision for the future of the business with these stakeholders. Congratulations on a successful, and confidential, sale of your business!

The post Under the Radar appeared first on American Business Brokers.