Networking Expert to Speak Jan. 14 to Business Brokers
Marie Fratoni, a business coach, human potential expert and master networker, will speak on Tuesday, Jan. 14, to the Georgia Association of Business Brokers.
Ms. Fratoni, CEO of Get Clients Everywhere, will talk about how entrepreneurs can cultivate fulfilling and profitable professional relationships through sound business-building strategies. The GABB is the state’s premier organization dedicated to professionals who buy and sell businesses in Georgia. The meeting will begin at 10:30 a.m., preceded at 9:45 a.m. by a free continental breakfast and networking session. The GABB meets at the auditorium of the Georgia Association of Realtors building at 6065 Barfield Road, Sandy Springs, GA, 30328.
As the CEO of Get Clients Everywhere, Marie Fratoni works globally to help professionals build solid, long-term, successful businesses. She coaches business owners and professionals to become savvy, social, and successful through cultivating professional relationships that are both fulfilling and profitable. She provides sound business building strategies, coaching, and growth-filled seminars that are fun, dynamic and valuable.
As a community leader, Marie makes a difference! She is a staunch advocate for women in business, founding and leading several professional groups throughout the years designed to up-level the careers of women including the Women’s Professional Development Network (WPDN) in Atlanta.
Her strong community involvement in charitable causes and organizations has placed her into the Who’s Who of Women in Business and the Who’s Who of International Business. Marie is a Registered Corporate Coach, RCC, popular speaker, and she truly enjoys helping business owners double or triple their income.
The GABB is the state’s largest and oldest association of professionals who specialize in brokering the purchase and sale of businesses and franchises. Broker members help owners determine the asking price of their business, create marketing plans and strategies for selling their business, identify and qualify buyers, and have the knowledge, experience and skills needed to help maintain the confidential nature of the process. The professionals of GABB relentlessly pursue professional development so they can provide superior, ethical services for all customers and clients. Affiliate members include bankers, lawyers, appraisers, insurers and other professionals who work closely with brokers to help owners and buyers get to the closing table.
For more information about GABB, please contact GABB President Dean Burnette at 912-247-3209 or dean@b3brokers.com, or GABB Executive Director Diane Loupe at diane@gabb.org or 404-374-3990.
If you are not a GABB member and wish to attend the meeting, please fill out this form. GABB meetings are free and open to the public.
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What Would Your Business Sell For?
Business owners who are preparing to sell their businesses always want to know how much their company will bring on the market. Often they have an idea of what they think the business is worth, but that price is often high.
There is the old anecdote about the immigrant who opened his own business in the United States. Like many small business owners, he had his own bookkeeping system. He kept his accounts payable in a cigar box on the left side of his cash register, his daily receipts – cash and credit card receipts – in the cash register, and his invoices and paid bills in a cigar box on the right side of his cash register.
When his youngest son graduated as a CPA, he was appalled by his father’s primitive bookkeeping system. “I don’t know how you can run a business that way,” his son said. “How do you know what your profits are?”
“Well, son,” the father replied, “when I came to this country, I had nothing but the clothes I was wearing. Today, your brother is a doctor, your sister is a lawyer, and you are an accountant. Your mother and I have a nice car, a city house and a place at the beach. We have a good business and everything is paid for. Add that all together, subtract the clothes, and there’s your profit.”
That accounting method won’t help you to sell your business, however,
A commonly accepted method to price a small business is to use Seller’s Discretionary Earnings (SDE). The International Business Brokers Association (IBBA) defines SDE as follows:
Discretionary Earnings – The earnings of a business enterprise prior to the following items:
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income taxes
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nonrecurring income and expenses
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non-operating income and expenses
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depreciation and amortization
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interest expense or income
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owner’s total compensation for one owner/operator, after adjusting the total compensation of all other owners to market value
Here are some terms as defined by the IBBA:
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Owner’s salary – The salary or wages paid to the owner, including related payroll tax burden.
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Owner’s total compensation – Total of owner’s salary and perquisites.
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Perquisites – Expenses incurred at the discretion of the owner which are unnecessary to the continued operation of the business.
Developing a Multiplier
Once the SDE has been calculated, a multiplier has to be developed. The following (just as a guideline) should be rated from 0 to 5 with 5 being the highest. For example, if the business is a highly desirable business in the current market, “desirability” would be rated a 4 or 5. If the business is in an industry that is quickly declining or nearly obsolete, “industry” would be given a 0 or 1 rating.
Age: Number of years the seller has owned and operated the business.
- Terms: Is the seller willing to offer terms? For example, will the seller accept 40 percent as a down payment with the seller carrying back 60 percent at terms the business can afford while still providing a living for the buyer?
- Competition: Consider the local market.
- Risk: Is the business itself risky?
- Growth trend of the business: Is it up or down?
- Location/Facilities
- Desirability: How popular is the business in the current market?
- Industry: Is the industry itself declining or growing?
- Type of business: Is the business type easily duplicated?
The average business sells for about 1.8 to 2.5. Obviously, if the SDE is solid and the multiple is above average, the price will be higher. Keep in mind that the price outlined includes all of the assets including fixtures and equipment, goodwill, etc. It does not include real estate or saleable inventory. The price determined above assumes that the business will be delivered to the buyer free and clear of any debt.
Veteran Wisdom
When all else fails, the words of a veteran business broker will work.
Asking Price is what the seller wants.
Selling Price is what the seller gets.
Fair Market Value is the highest price the buyer is willing to pay and the lowest price the seller is willing to accept.
Sellers should keep in mind that the actual price of a small business is usually about 80 percent of the seller’s asking price. A professional business broker will be familiar with the best way to price your business so that it sells.
Read MoreCan you Understand Your Buyer’s Key Motivations?
Negotiations can be tricky affairs. One wrong move can undo a tremendous amount of work. In negotiations, it is best to take a moment and think about the other party’s motivations.
What are their needs and how best can you meet them? Understanding where your buyer is coming from increases the chances of a successful negotiation.
What Appeals to Most Buyers?
When it comes to selling a business, you likely will not know your buyer personally. This means that you will not know what they value most, how exacting their standards will be, and how easy or challenging they will be during negotiations. That’s why it is imperative to err on the side of caution and act in such a way that would appeal to most buyers.
Ensuring that your business is in strong financial health means that your business will be appealing to both a corporate executive as well as an individual buyer with a leadership/managerial background. Keep in mind that individuals who buy businesses will want a strong ROI, and often they will want the responsibilities that accompany that investment to not interfere too greatly with their current lifestyle.
Playing into Emotions
In general, buyers tend to be the most excited at the beginning of the sale process. It is at this point that you can expect your buyer’s passion to be its strongest. As a result, the first stages are when you want to keep your presentation and approach the most realistic. The reason is that once the surge of passion has worn off, your buyer may otherwise feel that you have tried to oversell your business.
Being Forthcoming with Information
It is quite common that you will not at first know if your buyer has previous experience in your market. As a result, you shouldn’t assume that they understand anything about your business or industry. In short, it is definitely in your best interest to be very honest about your business and what is involved in running it. If there are issues that they will invariably discover, then it is best to go ahead and disclose those issues early on as it establishes trust and goodwill.
Understanding Expectations
Another area to consider is what a buyer may expect of you after the sale. A buyer who already possesses a background in your niche would already be very familiar with the ins and outs of your industry. Having you around after the sale may not be viewed as necessary or beneficial.
However, with that said, the exact opposite may also be true. You may be dealing with a buyer who is in dire need of your expertise. These factors could be of critical importance in what you offer your buyer in terms of your availability. Again, that’s why it’s best to not make assumptions and make sure your terms would appeal to a wide variety of backgrounds.
An Investment of Value
Invest the time to understanding your buyer’s motivation. The more you understand what it is that your buyer wants out of the transaction, the greater your chances of focusing on the areas of your business that best match those expectations.
When it comes to the motivations and concerns that prospective buyers may have, a business broker can add a new level of understanding. The value that your broker adds to the process of selling a business is difficult to overstate.
Copyright: Business Brokerage Press
Read MoreHow Not to Fail as a Business Broker
By Lou Vescio, CBI, M&AMI, Managing Partner, Coastal Business Intermediaries & Agency Brokerage Consultants
2017 Chairman of the IBBA, Fellow of the IBBA, Fellow of The M&A Source
Having been part of the Business Broker or Business Advisor Profession for about 16 years, I have seen many new Brokers come and go! I have also seen many grow their practice into very lucrative and profitable enterprises. Why do some Brokers succeed and prosper, while others give up in six months to two years? Having participating in several professions in the past fifty years, from flying jets in the Air Force, to a 15 year career with a Fortune 500 company, to building a couple computer training businesses and selling them, and finally becoming a Business Broker, I believe I have identified a few traits that make the great Brokers great and why some Brokers fail.
Perseverance – If you have ever read anything about Navy Seals, they never give up! The Basic Underwater Demolition/SEAL (BUD/S) school includes some of the most difficult training that exists, and most participants drop out due to the physical and mental stress. Perseverance is the key to their success.
This is not to say that becoming a great Business Broker comes close to becoming a Navy Seal, but all successful Business Brokers that I know exhibit the “failure is not an option” mentality. The Business Brokers workday is not a “9 to 5” type of day; it’s an “I will do whatever work I need to do, whenever I need to do it” type of day!
Education – Great Business Brokers are always learning more about their profession. Education obviously includes taking IBBA and M&A Source courses and workshops attending professional conferences sponsored by associations like the GABB, but it also includes reading everything available that is pertinent to the profession. Great Business Brokers also network with other great Brokers across the country and even across the world. Every business is different, every deal is different, and sharing and networking with other professionals offers new and fresh ideas and concepts.
Learn to say “No” – One of the Brokers I admire is Jim Afinowich, Managing Partner with IBG Fox & Fin in Scottsdale, AZ. Many years ago, he taught a workshop on saying “no” to bad listings. New Brokers tend to take almost any listing just so they have something to sell, but statistics tell us that 75% to 90% of businesses listed by Business Brokers do not sell! On the other hand, great Brokers sell 80% to 95% of their listings. Learning to price businesses properly (that Education thing above), properly analyzing good businesses when writing a great CIM (again that education thing), and walking away from unreasonable sellers by “just saying no” (in a nice way of course) are a few keys to success.
Marketing – While we all like to receive great referrals, most Brokers would go out of business if they did not market their services. Without going into the details of what kind of marketing a Broker should undertake, the key is marketing costs money and it is a requirement to succeed. The IBBA offers courses, workshops and webinars on every type of marketing, and the costs can vary from hundreds of dollars to tens of thousands of dollars. Fifty years ago, Tom West, author of The Complete Guide to Business Brokerage, suggested mailing a hundred letters a week and calling that same hundred business owners a week later. That is probably the bare minimum and may still be one of the most effective tools. Marketing is one of those “just do it” activities, and do as much as you can afford!
Salesmanship – While many people may disagree with me, we are saleswomen and salesmen. If we do not sell, we don’t make money! Some Brokers like to refer to themselves as advisors, consultants, or intermediaries, but in the end, we are still salespeople! More precisely, we engage in consultative selling, meaning we focus on creating value and trust with the prospect and exploring their needs before offering a solution. Our first objective is building a relationship, and then we provide the right solution to the problem. There are many courses and books on how to sell everything under the sun, but one of the best sales books a Broker can read is How to Win Friends and Influence People by Dale Carnegie (1936). It is more about getting people to like you, and that is the first step in selling. You can download and read it here for free.
Find a Mentor – Having a mentor when starting out as a Business Broker is a big plus, and joining a professional association like the GABB can help with this. Having an experienced and trusted adviser who will assist in training can shorten the timeline from “Start” to “Success!” It is also advisable to work in a successful brokerage when starting out to avoid many costly and time-consuming mistakes. Whether it be a franchised brokerage or an independent brokerage, find a mentor that meets the following criteria: 1) knows how to make a lot of money selling good businesses, 2) promotes IBBA education and certification, 3) assists in valuing and critiquing potential listings and 4) assists in negotiating difficult transactions.
Become an IBBA Contributor – One of the best ways to enhance your IBBA experience is to actively participate in the annual conferences, courses and workshops and share your experiences with others. Join a committee or two and be active. The friends you make and the experiences you share with others will enhance your Business Brokerage experience. (Note, the GABB also offers conferences, committees and monthly meetings.)
Finally, to all you Great Business Brokers out there, make friends with a new member at the next IBBA Conference and offer yourself as a mentor. You will find it very rewarding!
Reprinted with the permission of the International Business Brokers Association.
What Kind of Business Seller Are You?
By Peter Siegel, MBA, Founder and President of BizBen.com.
Almost everyone who owns a company wants to put it up for sale sooner or later. And if the owner doesn’t have employees or family members ready to put up the money and take over the business, the owner must find a buyer in the business-for-sale market. Sadly, only one-third of the hopeful sellers in this market will be successful.
That means two-thirds of owners unable to connect with a buyer will ultimately have to close the business or give it away. The problem may be that the business simply is not desirable. But just as frequently, the reason an owner can’t make a sale is because he or she is one of the many seller types who inevitably will fail.
If the seller can identify what type of seller they are, they can gauge their chances of successfully selling their business.
1. Make a Killing Mike: Also known as “Make a Million, Mike,” this individual believes his business is worth more than any sensible buyer will pay for it. There are a number of ways Mike justifies the asking price. A popular idea is that a similar business recently sold for the price Mike wants. But no two businesses are alike, and Mike doesn’t understand that the “similar” business is much more profitable and in a better location. The market may not reward Mike if he should eventually lower the price to a figure close to its value. Buyers often are not interested in investigating a business that has been on the market for a long time – whatever the reason.
2. Clarence Can’t Carry: An important selling feature of most any business offering is the willingness of the seller to “carry back” part of the purchase price. Along with a cash down payment, the seller receives a promissory note usually secured by the business assets, to be paid off by the buyer over a period of time. It’s reassuring for a buyer when the seller is willing to help finance, because it demonstrates that the seller believes in the business and in the buyer’s ability to operate it successfully. An offering that can only be purchased with all cash is almost always unappealing compared to other opportunities that come with seller financing.
3. Rita Rosy Picture: According to Rita, her business is about to become as much in demand as this week’s most popular show business celebrity. She has the best inventory in town, the most helpful and loyal employees, and greater prospects for the future than any buyer can imagine. Even a business that does excel in some respects has its problems and disadvantages. Buyers know that and often don’t feel secure about an opportunity that is described only in the most optimistic way. When meeting with a seller who doesn’t come across as honest and credible, many buyers get a negative feeling about the opportunity – the opposite of what the seller intended.
4. Nick Not Ready: Any prospective buyers meeting Nick will wonder how he could be trying to sell his business but not be able to produce current financial information, a list of assets to be included, or a definitive description about the premises lease that the landlord will provide to a new owner. Does the seller have something to hide? Is he really that disorganized? If so, what does that say about the condition of the business? Did he neglect to “get his stuff together” because he doesn’t really believe the business is salable? These are questions that occur to buyers as they decide they aren’t interested in what Nick has to offer.
5. Don’t Worry Dorothy: When Dorothy tells a prospective buyer that he or she shouldn’t worry, the buyer usually worries. Buyers want to know what happens if the customer who accounts for half the company’s income decides to do business elsewhere. They want to understand the consequences if a large competitor moves into the neighborhood. If the seller can’t answer these questions, the buyers really won’t worry about those issues. That’s because they’ll look for another business to buy.
6. Secret Sam: One of the things Sam likes to tell prospective buyers is how much of the company’s income goes directly into his pocket without being recorded on the books. He may be proud of his skimming habit. He may think he’s quite clever at fooling the taxing authorities. He might think the buyer will add the total of unreported cash to the reported income and decide the business is making enough money to justify the asking price. But he’s mistaken. The buyers who investigate Sam’s business soon realize he can’t be trusted and move on to find out about other opportunities.
7. Realistic Ralph: Since he is motivated to sell, Ralph wants to present his business in a way that will generate positive responses from buyers. He understands he needs to be proactive in preparing the business for sale. The asking price accurately reflects market conditions. His books are in order and ready to be investigated by qualified buyers. Ralph met with financial institutions with the help of a niche financial advisor who specializes in business purchase financing. The business has been prequalified for financing. And Ralph is willing to carry back 20% of the price with a note. And he’s hired a professional business broker from the Georgia Association of Business Brokers who can develop a confidential plan to market his business to qualified buyers. His approach is a clear recipe for selling success.
If you identify with any of the first six seller types, you’re limiting your chances of selling your business. But if you assume the characteristics of Realistic Ralph, your business is likely to be among the one-third of business offerings that result in a sale.
About The Author: Peter Siegel, MBA is the Founder and President of BizBen.com. He is a SBA SCORE Counselor, author, consultant/coach (ProBuy, ProSell Programs), and advocate on the topic of buying and selling small to mid-sized businesses in the California marketplace. Having writen three books and hundreds of publication articles he has assisted small business owners/sellers, business brokers, agents, and business buyers for over 25 years. This article was adapted from one that originally appeared on his blog.
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