A Word on Buying or Selling a Business

Considering Buying or Selling a Business?

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8 Biggest Reasons I want to Sell My Business or Buy a Business

8 Biggest Reasons I really want to Own My Own Business Can  look very much like the 8 Biggest Reasons I really want to Sell My Business.

Reasons to buy sell a business

Why does someone buy a business, and what does drive a business owner to the decision to sell their either long term ownership of a business or short term ownership of a business?  As  Former and current  business Owner I have owned a couple  businesses,  I have started businesses, I have bought multiple businesses, and I did sell my business.  As a  Florida Business broker I have both represented Buyers and Sellers of businesses.

So much goes into the decision  of buying a business or into the thought process of selling a business, but often it can be similar criteria that just sits on the opposite side of the ledger….

Owning your own business can be one of the most satisfying processes in ones life.   Why does someone want to own a business.  Very often it becomes the same reasons one wants to sell his or her own  business.

Reasons For Owning Your Own Business: “I want to Buy a Business because” –

1)MONEY– want to make lots

2)PASSION– I love making widgets- I love helping people with my products/ services
3)ACCOMPLISHMENT– It just feels good and a feeling of success
4)OBLIGATION– It is my best means to support myself and or family.
5)EXCITEMENT– I love working 24/7
6)CONTROL– I control my own destiny. I am the boss, I wont have to report to anybody. I can do whatever I want!
7)OPPORTUNITY– I’m young-limitless full of health, energy, optimism
8) TIMING – “I’m Ready” to buy own my own business

Reasons For Selling A Business: “I want to sell my Business because “-

 

1)MONEY-Not making enough, money is less important.  Or Ive done well and ready to cash in on my efforts.
2)PASSION– I used to love making widgets, now I’d rather collect shells, golf, work for someone else or do anything but make another widget. of ” If I have to deal with another customer I’ ll scream”.
3)ACCOMPLISHMENT– The feeling of accomplishment is gone and or less significant, or Ive accomplished all Ive wanted in this business.
4)OBLIGATION– My family is no longer around, Im not going to pass business on to my kids
5)EXCITEMENT– after working 24/7 I am now burned out and I get excited about the idea of not having to deal with it anymore
6)CONTROL-Insurance Companies,employees,IRS,State, Federal policy control my destiny, and run my business more than I do!
7)OPPORTUNITY– I feel old,  have health issues, tired- lack the energy this company needs- exceeded my limit
8) TIMING– “I’m Ready” to sell my business and move on…

While the list could go on and on, Contrary to common belief—– Its not always just about the money

When do I think it is a  good time to buy a business?  When YOU are “ready”

When  is a good time to sell my business –  When YOU are “ready”

 

 

 

Starting Or Buying A Business-Own or Rent Building?

Starting a business, or buying a business involves many decisions  ranging from what one should  put on your business card to where to locate your business.  Many small businesses are run from ones own personal residence,  and there are many advantages and disadvantages that can come along with that strategy.

But operating your business from a leased space, rented space, or a space you or your business would buy, can be a very important decision for your business.  The business that I had owned for 20 years, I had owned the building and surrounding property, (I still own and lease back, even after the sale of the business).

Owning A Real Estate For Your Business

Currently my role as a business broker has me working with business owners that both own the building they operate the business from they are selling and business owners that rent their space. Of  almost 1000 businesses sold in the state of Florida in the last year,  thru the Business Brokers of Florida of which I am a member of, less than 8% of them involve real estate.

Is it better to Own or Rent your Businesses Property?  

Most business owners in Florida that sold their business rent their buildings.  There are just way more non- owner occupied properties than owner occupied properties.  Again I owned and currently own and rent out the building I operated my business out of.  My thought process was that I had long term plans for my business and I viewed it as a means of building equity.  I do look at it a little different in today`s economy.

I do know of several business owners here in Florida that bought their building 5-10 years ago, ( they viewed the acquisition as an investment) and while the business may be doing somewhat ok during these difficult lean times, the building is so upside down that it may take 5, 10+ years or more, before the amount owed on the building is equal to or greater than market value.

To exacerbate that dilemma, ” like spaces” may be rented at a fraction of what monthly mortgage, insurance, and taxes payments may be.  It would be nice to be able to treat this expense as other expenses and when you have a more cost effective means just pursue that route, but buying/selling a building (or a business)  is not a very liquid investment- especially in today`s market.

Some Pros of owning a building may include:

  • more control, no landlord to report to and changes to your building allow you greater flexibility
  • potentially over the long haul you can accumulate equity
  •  If you are buying now, are you buying at a real value price, and its hard to argue that locking in at todays interest rates would not be a good thing.

On the Con side:

  • One must consider the opportunity cost of the money that is devoted to a down payment when buying a building- how much could that money have helped you grow your business?
  • If you need to move your business a  rental/lease agreement may allow you greater flexibility.
  • Owning a building is more responsibility

Operating lean, low overhead, low monthly expenses greatly enhances the likelihood of acceptable profits.  I am pleased I had owned my building I operated my business out of, but would I make the same decision today to buy a building to run my business from?

If I were buying a business here in Florida would I require that I can buy the building along with the business I am buying- today I am not so sure. Leaning  towards the flexibility of renting until  further clarity on where  on economy is truly heading seems to be a reasonable approach.

Waiting…. to Sell Your Business

I just had a birthday.  Yeah I know- So What….  But  celebrating a birthday when you are “Middle Age” by most definitions and or “old” by my teenage daughters definition a little introspection is done.  Fact is Im not getting any younger.  As a business broker based in Florida it also makes me think of all the business owners that are getting older and maybe are or have been ready to sell their business but the bad economy has delayed that decision. Another year passes, the “recession” is still with us and it really looks like it will be with us next year and maybe beyond.

How Long Can A Business Owner Wait To Sell Their Business?

What if this down economy last 2,5, 10 years.  I am generally an optimistic person.  I started and owned a business for 20 years and during the lean years I continued to see the glass as half full, and fought thru some difficult years and successfully sold my business when I was ready.

I believe there are many business owners that had planned to have exited their business by now.  Maybe they planned to sell their business and begin enjoying “that retirement thing” they have heard of, but had to delay those plans due the the reduced value of their 401k and other investments, the reduced equity in their home, and the lower revenue and profit of potentially their biggest asset- their business.  Its easy and common to say ” I want to sell my business but I don`t want to sell it now when my business is down”.   I understand that thought process.

Things To Consider When Deciding To Sell Your Business

But I think from here is where the thought process becomes more difficult.  Considerations should include:

  • What if we remain in a prolonged recession- can I wait 3-5 plus years?
  • What happens in our world of supply and demand. Is a pent-up supply when released, going to affect prices/values downward as the increased supply hits the market?
  • Is there really this large number of baby boomers looking to exit businesses and move into retirement to further flood market and affect supply/demand price?”
  • Maybe I’m told I should wait… Ive been working for 20-30 years towards this “end game”, do I really want to wait?
Sell Your Business

Photo (c) apptivo.com

As a business broker in Florida, maybe some day I will go to a meeting of business owners and not hear stories about a foreclosure that one is going thru or their friend is going thru.  Maybe I will attend a seminar or educational session put on by bankers or SBA bankers that doesnt sound empty and completely disconnected by thier purported audience- the small business owner , that needs financing or entrepreneur that wants to buy a business.  This may happen, but its not going to happen tomorrow.  But how many tommorows is it going to take.  How many more birthdays will pass before the time is right to sell your business.

Most Valuable Skill of Todays Small Business Owner- Treading Water

Running a business, owning a business, buying a business, or starting a business requires a whole toolbox of skills, efforts, attributes, timing and possibly some good fortune.  It is well documented that to successfully own a business buy a business or start a business requires skills such as:

  • Being Driven
  • Organized
  • a “Do whatever necessary” attitude
  • Willingness to experience failures but not accepting failure as an option
  • Financial ability
  • Leadership skills, sales, marketing, the list can go on an on.

There is a new requirement that a small business owner needs  to be part of his/hers skill set- the ability to tread water.

New Business Skill – Treading Water

Running a business over the last several years has required the small business owner to attain the skill of “treading water”.-  And for this discussion I am defining treading water as the ability to “hang on” to the businesses until the economy recovers.  And when one looks at our economy from a Main Street perspective in lieu of a Wall Street view,  the need for one to be able to tread water for a couple more years may be needed.

My definition of a small business is not how the government defines small business, rather the millions of businesses with 50 or less employees (and the many with 5 or less employees), that currently are working harder to end up with less and essentially try to hang on until the economy turns around.  Recessions don’t last forever?- right?

Photo (c) illustraconsulting.com

A Rising Tide lifts all Boats…. I recently had been on an Alaska Fishing trip , and fishing up there is all about the Tides,  and you plan and your time your fishing activities around them.  But the tide you can count on.  The boats and the docks are floating piers which allow the boats to move up and down with the Tide.   Every whatever hours, tide comes in a raises all the boats about 15 feet higher, tides leave all boats go lower.    One day the economy will improve and the vast majority of businesses will benefit (rise) from this improved situation.

But for how long can the small business owner tread water until the economy improves overall consumer spending, a beat up housing market, and significant unemployment problems.  As a business broker I engage in confidential discussions with business owners and hear the stories of small business owners  using  the high rate credit cards to help finance the business.

I talk with the small business owner that “owns” the building he operates ,  yet is so upside down on the building that turning that “asset” back into an asset is a remote possibility at best.  Most all payroll cuts have been made, some have moved into small leased spaces, others have long since made adjustment to personal and business expense spending to adjust to these difficult times.

Treading Water…. How Much Longer

How long will the small business owner need to tread water for?  We all know it is prudent to have savings/reserves for backup and or down days, but how long can reserves hang on for.  “Business Owner A” may be able to “tread water” for 1 year yet”Business Owner B”  may be able to tread water for 2 years- then what?  The previous business I had owned for 20 years did go thru multiple recessions.  If you own a business for any duration of time you will experience the economic cycles that do occur.  This recession is so very different.

As a small business owner currently working as a business broker in Florida, I continue to look at newer/better ways to conduct my business activities in this environment.hings that worked 2 years ago, may not work now.    It will be nice one day when the tide comes in and raises all boats, but in the mean time I focus on improving my situation.

I expect no help from government, banks, or others, waiting for help from those entities, to me is like waiting for a tide on a land-locked pond.   People and business are still buying and selling businesses but at a much slower pace than several years ago.  So like all the small business owners I work with, I have to work more for less.     How long can these small business owner tread water until conditions improve- I see and talk with  so many that are getting very tired.