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American Business Brokers & Advisor Founder & President PROFESSIONAL INTERMEDIARY & MARKET MAKER FOR PRIVATELY HELD COMPANIES Author of ‘The Art of Buying and Selling a Convenience Store’ & ‘Hidden Wealth’ Involved in the Sale of 800+ Businesses Advisor • Consultant • Speaker
NOVEMBER 2020
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When Is the Best Time to Sell a Business?
One of the most popular questions I’m asked is this: When is the best time to sell a business? Knowing the best time to sell one’s business is more important than knowing what it is worth because the timing of the sale will dictate what the business is going to be worth. You have heard me talk a lot about how right now is one of the best times to be a buyer and a seller because of the cheap money in the marketplace for buyers, which has increased the value of what a business will sell for. And with the Federal Reserve recently announcing they are planning to keep the interest rates low for the next couple of years to stimulate the economy, business valuations will likely remain high, which may be true before factoring in inflation and the value of the dollar — but I want to keep things on a basic level for now. As I discuss in Chapter 4 of my recent book, “Hidden Wealth: The Secret to Getting Top Dollar for Your Business,” the best time to sell your business is when you want to and when the business is doing well. This is contrary to what many people may think. In fact, most business owners wait until there is a significant life-changing event, such as a death in the family, someone contracting a disease, a divorce, or a disruption in the marketplace due to a new competitor. These are called the “Dismal D’s,” and I go into more detail in Chapter 2, listing all of the “Dismal D’s” and many other reasons why business owners sell their businesses. (Chapter 2 is an eye-opening chapter.) That said, if you are ready to sell your business, act now! Presently, all the stars have aligned: High valuations are paid for
businesses, the tax climate is very favorable to a seller — even businesses that are C corporations are treated better tax-wise than in previous times — and it is a seller’s market. Of course, one of the most common reasons business owners give for not being ready to sell their businesses is because they are too young or don’t know what they would do after they sold the business. I always answer that they may be right, but the marketplace does not care about their personal life or what they think. The logical answer takes into consideration the realities I just mentioned: high valuation, a favorable tax climate, and a seller’s market. Stockbrokers always like to tell their clients not to try and time the market; the key is how long you stay in the market. That is okay if you are selling stocks, but when the business is
your livelihood and you are only going to get one chance to get top dollar for your business, the timing of when you sell your business is everything. Markets cycle up and down, and it is always better to sell on the top. To find out whether the value of your business is at the top of the marketplace, contact me for a confidential conversation or order my book, “Hidden Wealth.” Either way, you will be more prepared and knowledgeable about the best time to sell your business. The book is available on Amazon.com or TerryMonroeBooks.com
–Terry Monroe
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The Polls and Your Portfolio
How Does the Election Affect My Portfolio? As Americans head to the polls to exercise their right to vote in the presidential election, they bring many issues and beliefs with them. For some voters, these include questions about their portfolio and how the winner of the election could impact their savings, retirement, and ultimately, their future.
The answer, many financial analysts say, is not much.
Analysts have found that the market has remained stagnant in the year leading up to an election for the past 100 years. Although there hasn’t been any significant change to warrant concern, voter concern over uncertainty tends to be reflected in the market. After the ballots are counted and a president-elect is chosen, the market may see a downward trend if a new president (not incumbent) takes office. Again, this is likely due to uncertainty and concern. Still, the market always ebbs and flows, and most presidents leave office with normal markets. However, what impacts your portfolio more may be congressional elections, which decide who our lawmakers are. Law creation, divided government, and responses to those laws influence portfolio performance more than most presidential elections. Remember, the market responds to reaction, and whom we elect to Congress and how they legislate more directly impacts our lives than the president.
The pandemic that has rocked 2020 has given us plenty of lessons on market volatility. As COVID-19 swept across the U.S., many residents had to shelter in place while industries shut down for an unprecedented hiatus. Financial planners and analysts encouraged patience to allow this storm to pass while they tried to identify long- term change. As we’re still recovering from this pandemic, so is the market, which could have an influence on the correlation between the election and the stock market. That said, if the past 100 years are any indication, you have little to worry about. Whoever occupies the Oval Office in 2021 will have very little influence on your portfolio. Your best financial strategy is to do the same thing you’ve been doing throughout the pandemic: Remain patient.
How to Have a Profitable Business in Any Economy
People start and buy businesses for many different reasons. Some people do it as an extension of their passion for a certain thing, such as flowers, woodworking, machinery, or serving people. Some people do it for the thrill of winning. But ultimately, everyone who goes into business does it to make money. Thousands of books have been written on the subject, telling you what to do and what not to do, but ultimately, making money in business is not that difficult. Listed below are a few fundamentals in order to have a profitable business. Income – Expenses = Profit. Income is determined by how much money is generated by the business. Expenses are what the business needs to operate. Profit is what is left over after deducting the expenses from the income. You can always increase your income, but you can only reduce your expenses so far
before you don’t have enough of the basics to keep the business operating.
Sales: A lot of people don’t like to hear the word sales because they don’t want to be in sales or affiliated with sales, but without sales, there is no business. Sales IS the business. The major goal of EVERY business is to increase sales because without sales, there is no income. Sales, combined with income and expenses, is a formula for ALL industries. It doesn’t matter if you are operating an exercise/yoga clinic or a computer chip manufacturer — the formula is the same. Even churches have a sales department to entice their congregation to give more. Sales are what makes the world go around.
you will develop a business model that works. This is called a profitable business.
To add more profits, hopefully the business model you have created is scalable, and you can duplicate the business model either through franchising, dealers who represent your business model, or additional facilities using the same business model you created and perfected. What I have explained is nothing fancy and very simplistic. This formula is applicable in any geographic area and to any business. Anything else beyond the Sales = Income – Expenses = Profit model is called an excuse. I was taught this early on in my business career: “You can make money or you can make excuses, but you can’t make both.”
Over time, as you practice and perfect the formula (Sales = Income – Expenses = Profit),
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The Team You Will Need TO CLOSE A WINNING DEAL AND SELL YOUR BUSINESS
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Most entrepreneurs only sell their business once — so it’s important to get it right. That’s why hiring the right team of professionals, who understand the ins and outs of selling businesses, is so important. Below are some of the essential positions you’ll need to fill. However, keep in mind that “almost all business owners have an attorney and an accountant … with whom they feel comfortable working … but those people might lack experience in selling businesses, which could result in the seller leaving thousands of dollars on the table.” The Attorney The attorney’s role in the sale is to give the seller legal advice on what can hurt them in the process. However, “there’s a big difference between an attorney who knows how to prepare real estate deeds and divorces, and one who knows what is involved in the sale of a business.” Don’t settle for an attorney just because you know them — find an attorney with the skill set and time to guide you through the sale of your business. The Accountant “Sometimes an accountant who has worked for the business owner for years is not in tune with the marketplace in which the owner operates. … That accountant may throw out a valuation that is nowhere near the market value of the business. There have been times I’ve sent the business owner back to their accountant to ask them how knowledgeable they are about the industry.” Accountants don’t sell businesses for a living. Their appraisal is not the end-all be-all. A Business Intermediary Accountants and attorneys are crucial parts of your team, but neither of them sell businesses for a living. “This is why you want to be represented by an experienced intermediary who does work on the front lines every day. … A business intermediary is a crucial part of the selling process of your business, keeping you focused on your goal to sell your business for the highest value. “Just as in sports, if a seller doesn’t have the right team of players in the game, they will either get defeated or become hurt in some way. … Get the right players involved to help you through this difficult and complex process and alert you to situations so that you don’t get blindsided along the way.”
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A Profitable Business in Any Economy Do You Have the Right Team to Sell Your Business?
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Researcher Brené Brown Helps Leaders Find Their Vulnerability — and Succeed
How many leaders do you know who will admit to their mistakes openly and honestly to their team? How many leaders have you heard ask their team for direction? How many leaders are willing to step aside so someone else can shine? Chances are if you know that leader — or if you are that leader — then you understand the future of leadership, according to author, researcher, and teacher Brené Brown, Ph.D., author of “Dare to Lead: Brave Work. Tough Conversations. Whole Hearts.” In this book, Brown details her seven years researching and gaining a better understanding of leadership. She interviewed business leaders at both small and large companies, asking questions that revealed what great leadership looks like. Together with her research team, she learned why certain workspaces thrive and grow while others, with seemingly just as powerful of ideas, wither and die. And it all boiled down to one thing, Brown says: courage. In “Dare to Lead,” Brown examines the four pillars of courageous leadership and how business leaders today can practice and perfect it. Brown teaches the four pillars through her consulting work and has seen radical changes in
organizations that practice courageous leadership. Brown offers examples — from well-known CEOs and within her own business — to walk readers through real-life applications of courage and how to create stronger teams through vulnerability. Brown exposes how business cultures that don’t practice vulnerability are ineffective as a result. She theorizes that often, these workspaces are filled with fear, uncertainty, and scarcity. To remove these negative traits, Brown offers leaders a road map to build their courage while practicing vulnerability and creating happier work environments. Brown has spent the past two decades researching and breaking down emotional concepts into tangible goals for her readers and followers. She is the owner of The Daring Way, a consulting firm that helps businesses develop vulnerability in leadership and the workplace. She is also the host of the podcast “Unlocking Us” and has one of the most-watched videos of all time, “The Power of Vulnerability.” You can learn more about Brown’s work and find “Dare to Lead” at BreneBrown.com.
‘Dare to Lead’
With Brené Brown’s Bestselling Book
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