American Business Brokers - February 2021

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American Business Brokers & Advisors 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

FEBRUARY 2021

8 Common Mistakes WWW.TERRYMONROE.COM Business Sellers Make

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If (or when) you decide to sell your business, there are certain mistakes you should avoid if you want to have a successful transaction and get the most money possible out of the deal. After selling over 800 businesses, I decided to list the eight most common mistakes owners make when selling their business. You try to sell it yourself. There is a reason pro athletes and actors have agents — because they get more money and better terms when they hire someone to negotiate for them. Likewise, you won’t get as much value for your business trying to sell it yourself without the necessary experience. Attempting to sell your own business will devour your time. So, instead, focus on running your business and leave selling it to a professional. You are too sensitive about your business. Nobody likes to hear they have an ugly baby, and the same is true when you are selling your business. Regardless of how hardened you think you are, you might potentially take negative comments about your business from prospective buyers personally. The solution is to get an intermediary to translate the buyer’s comments into requests that will be easier to stomach. You don’t know how to arrive at fair market value. Having an unrealistic idea about the value of your business can cause the deal to fall through. Learn what businesses like yours are selling for in the current market, and

never believe anything you read in the trade magazines about valuing your business. You don’t know how to recognize a qualified buyer. Different businesses require different kinds of buyers, and different buyers will pay different amounts for a business. You need to know which buyers are paying the most in today’s market because buyers change with the market. You probably don’t know where to look for the right buyer. Finding the right buyer for your business isn’t as easy as running an ad in a trade magazine or newspaper and seeing who contacts you. As a seller, you want to know who really has the money and whether they are serious. Are they cherry-pickers or low-ballers? Do they use the old bait-and-switch technique? Remember, time is money, and buyers are generally working on your time and your money. You forget that selling a business is a process, not an event. Selling a business involves a structured process that takes time — generally 6–12 months from conception to closing. It is a very detailed process that not all sellers can weather without guidance from a trained professional. You forget to assemble the right team to get the job done.

go well. The right team will probably include an attorney with experience overseeing business transactions, an accountant who understands the tax system and looks out for your best interests (even if it means losing your account), and an experienced intermediary who has working knowledge of your industry. You aren’t committed to selling. Assembling all of the data that buyers need to consider when buying a business is hard work. A lot of transactions will fall apart because the seller is either not committed to the process or does not have the mental stamina to continue. The solution is to hire a seasoned intermediary who will coach you through the process and help you to reap the rewards for your many years of hard work.

–Terry Monroe

Just like any sports team, if you don’t have the right team of players in the game, things won’t

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The Fountain of Youth

Could Be the Key to the COVID-19 Vaccine Vaccines have been the light at the end of this long, dark tunnel we call the COVID-19 pandemic, but scientists don’t yet have a full picture of the virus or its treatments. In an effort to better understand the coronavirus, researchers are looking at how medical professionals can better treat our most vulnerable populations or prevent them from ever contracting COVID-19. Experts have long feared that a COVID-19 vaccine may not help the older adults who need it most, as these individuals are often more at risk of contracting the disease and having a weakened immune system. However, some researchers hypothesize that anti-aging medications may boost the effectiveness of the vaccine for older adults, and there are some promising results from early studies. One study published in Nature found that a drug that limited the creation of the protein mTOR lengthened the lifespan of fruit flies and mice. Anti-aging expert Jan Mannick explains that researchers think mTOR may contribute to failing immune systems in humans, so blocking the production of this protein could drastically improve the success rate of a COVID-19 vaccine in older adults.

understand the possible link between anti-aging medications and their effects on the efficacy of a COVID-19 vaccine in older adults. These medications include treatments that indirectly affect aging like some diabetes medication. The good news is that you don’t have to wait for researchers to find a “miracle pill” to boost your immunity. Incorporate natural remedies into your routine instead! Eat plenty of fruits, vegetables, and other foods rich in vitamin D that boost your immune system — like salmon, mushrooms, and greens — and remember to drink plenty of water. While you’re at it, wear sunscreen to prevent the sun from aging your skin prematurely and increasing your chance of having other health issues. It’s important to stay optimistic and do what we can with what we know now while researchers work toward an effective vaccine.

As promising as these results and many other studies are, medical experts are quick to remind the public that more research is needed to

The 75% Employee Rule

WHY YOU SHOULD STOP SEARCHING FOR THE PERFECT EMPLOYEE

Throughout my years as a business owner, I oversaw thousands of employees. I would often complain about how hard it was to find good ones. Then, when I found good employees, I complained that they weren’t perfect. That struggle still exists today, as business owners and managers I talk to have similar gripes. So, how do you find the perfect employee? The answer is: You don’t. Let me explain. One time when I was running about 30 video rental stores, I was trying to put a marketing piece together, but I wanted it to be exactly right. So, even though I had an employee who created marketing tools and was good at his job, I didn’t trust him with my idea. I wanted it done perfectly, so I went to the local print shop myself. This print shop had made our marketing materials for years, and they knew who I was. The owner asked me what I was doing

coming to his store myself instead of sending an employee. I told him how I only trusted myself to get it perfect because I couldn’t find an employee I trusted to do the job perfectly. Then, he shook his head and told me something I haven’t forgotten since: There is no such thing as a perfect employee. Instead, he said, I should strive to find an employee who can do the job 75% correctly. He reasoned that if any employee could do better than that, they wouldn’t be an employee — they’d be their own boss. From that day forward, I still complained about how hard it was to find employees, but I never complained about finding the perfect employee. Instead, I looked for those 75-percenters. The 75% rule helped me keep what I want in an employee in perspective. It reminded me that employees are not mind readers. So, the next time you find yourself lamenting the

lack of “perfect” employees, remember the 75% rule. It will put your mind at ease. If you want to learn how I got my employees to be 75-percenters, stay tuned for the next edition of this newsletter!

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Take a Break!

The Danger of Being a People Pleaser

WORD SEARCH

John Lydgate once said, “You can please some of the people all of the time, you can please all of the people some of the time, but you can’t please all of the people all of the time.” I think that idea rings true, and yet so many people seem determined to please everyone around them all the time. It’s an understandable impulse — who wouldn’t like everyone to be happy with everything they did all the time? Unfortunately, however, people don’t work that way. We’re stubborn, prideful, and that means sometimes we’re disagreeable. That said, though, the secret to being a successful business owner — or successfully selling your business, for that matter — is not trying to please everyone. In fact, striving to be a people pleaser can be detrimental to your relationships with clients, staff, and potential buyers. Making sure your clients or customers are pleased is a good instinct to have — but don’t let it get the better of you. Sometimes, if clients sense that you’ll go to the moon and back for them, they’ll take advantage of your generosity and walk all over you. Should you go above and beyond what’s required when serving your clients? Absolutely — just have a process in place and set clear expectations that you’ll only break after careful consideration. The same can be said for trying to make sure your workers are happy. It’s good to have happy workers — happy workers are productive workers! Unfortunately, though, some workers may take advantage of certain workplace perks, like working from home or the ability to leave early, leaving more diligent workers to pick up the pieces of their unfinished projects. Again, you’ll want to communicate clear expectations for your workers’ responsibilities and clear standards for their performance. If you’re selling your business, savvy buyers will be able to tell if you’re a people pleaser, which might lead them to try to lowball you on your business’s worth. While you might not know how to set clear expectations for a business sale, I can use my experience as a business broker to create those expectations for you and any potential buyers to know.

GROUNDHOG HEART LINCOLN MLK JR PENNSYLVANIA

AQUARIUS BLACK HISTORY

PHIL PRESIDENTS DAY VALENTINE WINTER

CANDY CUPID

SUDOKU (SOLUTION ON PG. 4)

You don’t have to please every buyer. After all, you only have to sell your business once!

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INSIDE 7824 Estero Blvd., 3rd Floor Fort Myers Beach, FL 33931 1 2 8 Common Mistakes Made by Business Sellers Anti-Aging Medication and the COVID-19 Vaccine

Sudoku Solution

Stop Searching for the Perfect Employee The Danger of Being a People Pleaser

Take a Break

5 Great Ways to Start a Business Call

No matter what field or industry you’re in, you’ll probably find yourself in an awkward business call at some point. Starting a conversation with someone you don’t know well can be a struggle, and that’s where small talk comes in. This necessary skill helps us get to know people when deeper conversation isn’t possible or appropriate. Starting the conversation may feel like a lot of pressure, but with these five phrases, you’ll get the conversation flowing in no time. No. 1: “How long have you been in your position?” Show interest in what your fellow professional does by asking about their job and how long they’ve been doing it. People’s careers and life journeys may surprise you! If they aren’t open to talking about how they landed their current position, don’t worry — there are plenty of other ways to direct the conversation. No. 2: “Any plans this weekend/holiday?” Asking about someone’s interests, travel plans, or weekend activities not only helps you connect in the current conversation, but it also gives you a great way to start the conversation the next time you chat

by following up! Ultimately, the goal of small talk is to enjoy a short conversation and get to know someone in a limited amount of time. This question lets the other person decide how much to share. No. 3: “Have you heard of what [famous person] is doing lately?” Talking about a celebrity’s recent movie, philanthropic efforts, or project can be a great way to open up the conversation and learn about interests you may have in common outside of work. No. 4: “Recently, I heard [local news fact.]” We’ll be straight: The news has become fairly political over the past few years. However, there’s always interesting local news that isn’t related to politics. Local news can be a fun way to stay in tune with the community and keep your small talk entertaining. No. 5: “I really enjoyed hearing about ...” When you’re trying to wind down the conversation or segue into another topic, this can be a great phrase to use to reference an interesting point in the conversation and say farewell!

Struggle With Small Talk?

5 Great Ways to Start a Business Call

Practicing these five phrases is a small way to make a big difference in your small-talk skills.

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The following is an abbreviated version of an interview with Authority Magazine, which covers business, film, sports, and tech and credits itself with over 45 million readers worldwide. The interview is about how I became a business broker and some of my experiences along the way. Before we dive in, our readers would love to learn a bit more about you. Can you tell us what brought you to this specific career path? Over my career, I have owned 40 different businesses. I loved buying and starting businesses, but I discovered I wasn’t very good at operating them. Some made money and some didn’t. I enjoyed the challenge of finding and buying businesses, but running the businesses bored me. Then, I discovered the business broker profession. In that role, I could find creative ways to help people buy and sell businesses. It was the perfect job for someone with my experience as well as someone who needed a fix for his ADD. Can you tell us about a time you were able to build a business from scratch, scale it, and sell it to a bigger firm? In the early 1980s, I opened up a video rental store with a partner in a nearby town after discovering there could be a niche for that. This was before Blockbuster, and the first store we opened was very successful. With the money from the first store, we opened a second store — and then more and more until we decided to franchise them. After about 15 stores and a dozen franchises, I bought out my partner and became the sole owner of the video rental and franchise businesses.

Can you share with our readers the ‘Five Things You Need to Know if You Want to Build, Scale, and Prepare Your Business for a Lucrative Exit’? Know your tolerance for risk. If risk makes you anxious, don’t own a business. If you like some risk, but not enough to start a business from scratch, you could buy a franchise with a concept that’s proven successful. If you’re like me, and you relish risk, you might enjoy starting a new business from scratch. Turn what you like into a business. Find a business that fits your personality. If you don’t like preparing food, don’t get into the food service business. If you don’t like to travel, then don’t start a business that would make you travel a lot. Stick to the things that you like to do — otherwise, it will not last.

I knew I needed to grow with more locations, so I started looking for a quicker way to expand rather than building one store at a time. Now, here is where it gets interesting. One day when I was driving around in Missouri looking for locations for more stores, I came across a Walmart Supercenter. At the time, there were only about a dozen Supercenters in the country. Since I had already put video rentals in grocery stores, I decided to call Walmart and see if I could put video rentals into their new Supercenters. Long story short, I ended up renting space inside the Walmart Supercenters and grew my video rental franchise to 155 stores across 27 states and Canada. I eventually sold the majority interest of my company to some venture capitalists who make the people on “Shark Tank” look like goldfish, who then took the company public and allowed me to sell out.

Is there a difference between building a service-based business and a product- based business? Can you explain? There is absolutely a difference. Generally, a product-based business is capital intensive, and you have a good chance of losing a lot of money. Service businesses are easier and cheaper to get into. I recommend that most people start there because they can learn how to operate a business, take care of finances, and turn a profit all without too much risk. Every business owner makes mistakes, but the less expensive the error, the better.

Can you share a few ways to determine a good selling price for your business?

Find a business that will last. Third, look for a business that has upside and the possibility of being around for a number of years. Don’t pioneer a new concept you’re not sure will work. Chances are you are being delusional. Too many times, I jumped into a new concept for a business without researching it, only to fail miserably. Instead, find a successful concept that has been around a long time. Then, see if it would be profitable in the market area where you want to implement the concept. Make sure the business is scalable. Can your business open more units, cover a larger geographic area, add more product lines, or otherwise expand? To scale the business, you have to be able to add more locations — not all of which will be profitable — and that’s a very capital-intensive process. However, if your service or product can be sold over the internet, then the world is your customer base, and you can scale with minimal upfront investment. Always keep tidy books and records. The kiss of death is not having good books and records. When it comes time to sell and exit the business, remember that the buyer is purchasing a cash-flow stream. If you can’t show where the money came from and where it is going, you might still sell the business, but it won’t be for top dollar.

Every business in every industry has a different valuation model, some based on gross sales, some on assets, and some on net sales or other factors. However, all businesses are valued on cash flow. The goal is to get a positive cash flow with an upward trend every year. It doesn’t have to be a huge increase, but if a business shows an increase in net profit every year and is in an industry that is growing, it will attract buyers. The best way to determine what a business is worth is to first produce three years of profit and loss statements and make sure they are free of personal expenses. Then, find out what similar businesses are going for, maybe through a business valuation service. Do not ask your accountant, because they don’t work in your industry and cannot give you a good answer. You are only going to sell your business once, so you’ll want someone who helps people sell businesses every day to guide you through the process. You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? I would like to help more people get educated about how business works in its most simple form. It is the reason I write books. I especially believe learning how to operate a business is one of the most satisfying things you can do in life to take care of yourself and your family. And I want people to learn from my mistakes, since I’ve definitely made a lot of them, in hopes they don’t make the same mistakes and suffer the same grief I did many nights. Being successful in business generally comes down to believing in yourself and practicing the slogan: “If it is to be, it is up to me.” –Terry Monroe

How do you find a buyer for your business?

Finding any buyer isn’t hard, but finding the right buyer, who has the money and will pay top dollar for what you have created, is very challenging. Depending on the size of the business, you may want the help of a business broker or investment banker. I am a big proponent of using an intermediary, not just because I am one, but because I know from personal experience that finding good buyers yourself is hard. Generally, business owners are very good at what they do and not experts at selling businesses, and that’s fine. That’s why you hire professionals. It’s the same reason sports stars and celebrities hire managers, and that is to get them the most money. How do you decide if it’s better to build a business to exit, stick around for the long term and let the company bring in residual income, or go public? Having done all three, I will give you my opinion. I would build the business like I was going to keep it forever — provided the industry kept growing and the business was generating a profit, and I didn’t get tired of it. Finding a business that will pay you a residual income generally involves your depending on someone else to be the boss, which can be a problem if you like a lot of control. Going public is only good if you want liquidity. Unless you like dealing with a lot of regulations and accountants, I wouldn’t suggest it.

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