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American Business Brokers & Advisors Founder & President MERGERS & ACQUISITIONS BUSINESS VALUATIONS
Why Would Anyone Sell a Profitable Business?
In my book “Hidden Wealth, The Secret to Getting Top Dollar for Your Business,” I have a chapter titled “Why Business Owners Do Sell Their Businesses,” and I list 16 different reasons why businesses are sold. Recently I went back and analyzed the No. 1 and No. 2 reasons why I’m asked to sell an owner’s business, and what I discovered was interesting. Keep in mind that when I get the call from a business owner, it is not them having a random thought, and all of a sudden, the decision has been made to exit their business, which they may have owned for more than 40 years. It is only after deep consideration that they have made a decision, and I commend the business owner for having the courage to make the difficult decision to sell a business that is profitable and has been their livelihood and supported them and their family for many years. The first and most common reason why business owners decide to sell is burnout. I learned this when I first began selling businesses over 30 years ago. I have had business owners sit and look me in the eye and tell me how much money they were making, but that it didn’t matter anymore because they were tired and burned out. All they wanted was for me to get them out of the business, to help them reduce the stress and drama of running a business full-time so they could move on to another chapter in their life. Having been a business owner and operator of more than 200 retail locations, I could relate to what they were talking about, so I work with them and coach them through the process of letting go and learning to enjoy their life after selling their business.
Chances are that if you do not have family in the business with you, especially if you are running the business by yourself without any family or spouse to help you out, then being burned out will propel you to sell your business. Most people do not realize how hard it is to own and operate a business. It doesn’t matter what kind of business it is, either. Whether it is a convenience store or a large manufacturing business, the mental pressures are the same. If you are not physically at the business working, then you’re probably thinking about the business. This goes on 24 hours a day, and it wears on an individual. If you’re worried that you’re some kind of wimp for thinking you can’t take it anymore and you are feeling tired and burned out, you are not abnormal at all. You can take vacations and spend more time with friends and family and try to lighten the load, but it will not negate the fact you have obligations to attend to 24 hours a day and you will feel burned out. So, don’t think you are weak or a failure for having these feelings. Two of the last chains of convenience stores I sold, both the sellers told me on the day of the closing they felt like they had been let free because the pressure of not having to oversee the stores anymore, even though they had supervisors and people to help them. It is truly lonely at the top when you are operating and overseeing convenience stores. The second reason a business owner will decide to sell their business is because they don’t have a succession plan. Either the children are not capable of running the business, or they’re not interested in running the business going forward. Many times,
the business was the father’s and or father and mother’s dream, and they had been very successful in building and growing the business. But it doesn’t mean the same to the children because it was not their dream. The business was always there when they were growing up, and they tend to take the business and all the hard work it took to build it for granted. They weren’t there during the hard times and therefore cannot appreciate how much work it took to get the business where it is today because that was when all the heavy lifting took place. The wise business owner will recognize this and begin the process to sell the business while they are still in control and can direct the destiny of the funds from the sale, which, in some cases, the business owner has children who may work in the business, but they would be better suited in another business. Here again, four of the last businesses I sold, the business owners had children who either were working in the business or had worked in the business, but the owner realized in today’s business environment, they would be better off not working in the convenience store business and instead taking the money from the sale and investing the money with the children into another industry using the experience and knowledge they had learned from operating convenience stores. As time changes, so does people’s desires and interests, so take heed and ask yourself, “Does my situation fall into the No. 1 or No. 2 reasons, and should I be thinking about the future too?” –Terry Monroe
ADD MORE MOVEMENT TO EACH DAY Get in Better Shape
Getting the movement our bodies and minds need each day can be challenging. Many of us work on computers for hours, only standing to use the restroom or refill our water bottles. But we need to do more than that to stay healthy. When we add more movement to our daily routines, our muscles grow stronger, which helps improve our balance, stability, and coordination. Our bones become more durable and our joints more flexible. It’s no secret that moving helps us live healthier, but going to the gym can be expensive and time-consuming. Thankfully, we can adopt simple daily routines to add more movement to our lives. Here are a few worth trying. BE ACTIVE ON YOUR WORK BREAKS. If you work an eight-hour shift, you are entitled to a few breaks throughout your day. Try to use them to be active. Stand up and stretch or walk around once an hour if you work on a computer. Set reminders
on your phone so you don’t forget. You can even utilize a standing desk to avoid sitting for extended periods. If possible, get out during your lunch break and walk instead of sitting down. Being active throughout the day will help prevent stiffness and fatigue while improving focus and productivity. WALK OR BIKE TO YOUR DESTINATIONS. We’re all accustomed to getting in our cars whenever we need to go somewhere, but
maybe it’s time to walk or get the bike out instead. If you travel a short distance for work, consider walking there or riding a bicycle if possible. The same goes for trips to the post office, grocery store, or other locations close to your home. You’ll add some extra movement and sunlight to your days. TAKE THE STAIRS. If you work in an office building, skip the elevator. If you work from home and have stairs in your house or apartment, walk up and down the steps a few times. You can also take the stairs up to buildings instead of using walking ramps. This adjustment is one of the quickest ways to add exercise into your day, and it doesn’t take much! These little changes can go a long way, but remember that doing these activities once is not enough. They need to become a habit. Perform them every day when possible, and you’ll feel better physically in no time.
HOW TO GIVE A BUYER A DISCOUNT WITHOUT TRYING
Over the last three years, my company, American Business Brokers & Advisors, has been very busy working with convenience store owners who were interested in selling their businesses. ABBA has always been busy, but recently, the number of convenience store owners wanting to sell has increased. Why? A lot has to do with what was going on in a business owner’s life, and maybe retirement was on their mind. Plus, convenience stores have been selling at an all-time high, and this was because of the low-interest rates and cheap money, and the best time to sell is when the market pays you the most money. The cheap money has since gone away, but there is still a high demand for convenience stores with quality assets and good cash flow. As I mention in my book “Hidden Wealth, The Secret to Getting Top Dollar for Your Business,” the way to get the most money for your business is to be able to show a buyer how much money you are making and be able to prove it.
I just counted seven chains of convenience stores I am representing that will have to give the buyer a discount on what their business will sell for because they didn’t keep good books and records. And it is usually the simple things that could have been prevented. For example, not keeping track of the amount of income a business is generating from a specific location, but instead comingling the income of the one location with several other locations, thereby making it impossible to determine what each location is generating individually. The same goes for the expenses of each location and not designating the expenses specifically per location or not keeping track of where the money for each location is generated by category and instead just writing down everything as income. Instead of having detailed information by location for each of several locations, you have a big glob of numbers that may generate a
good income at the end of the day, but nobody knows where the money is really being made. A buyer will be able to see the business is making money but has no idea as to where the money is coming from and thereby will demand and get a discount from the seller. Businesses are valued by the amount of cash flow they generate, and if you can’t determine where the money is coming from, even though we can prove the business is generating the money, the buyer will get a discount. When I begin working with a business owner, I will ask a lot of questions about the business. I am almost doing forensic accounting on the business to make sure I don’t miss anything, ensuring I can get the business owner top dollar for the business. But if I can’t find the money after digging deep into the business’s books and records after reviewing hundreds of convenience stores over the years, how is the buyer going to find the money? Chances are they are not going to find it either.
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"HIDDEN WEALTH" The Secret to Getting Top Dollar for Your Business
TERRY’S QUOTE FOR THE DAY “The past does not equal the future. Live everyday with passion.” –Brian Tracy ► What is the value of what you are selling? ► Want to make sure the sale is confidential? ► Want to sell everything together & fast? Terry has sold over 857 businesses. His book tells you what to do and more importantly what NOT to do when selling one's business. GET YOUR FREE COPY TODAY! Email Terry@TerryMonroe.com Put FREE COPY in the subject line for your free copy of "Hidden Wealth", a ForbesBooks publication.
I don’t want my readers to think what I have talked about with a business having bad numbers only applies to a small business because that is not the case. Of the seven businesses I mentioned, they range from businesses that are generating between $1,000,000 a year to $6,000,000 a year in income. And surprisingly, all of these businesses had either an accountant or a CPA that worked with each of the businesses, and yet their books and records were all messed up. And for all of you who are old enough to remember Gomer Pyle from “The Andy Griffith Show,” then you can hear him saying, “Surprise, surprise, surprise!”
The moral of this story is don’t be a Gomer and make sure you have clean numbers that can be traced back to each location, and we can prove where the money is coming from, and you will always get top dollar for your business. P.S. The author of this article is guilty of not keeping good books and records, too, and if you read my book, “Hidden Wealth,” you will see where I had to pay Arthur Andersen $400,000.00 to clean up my books before going public, and yes, I had to give the buyer a discount. Ugh! –Terry Monroe
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Thinking About Selling Your Business in 2023?
The Limits of Fear- Based Marketing
Does Your Marketing Rely on Scare Tactics? FEAR FACTOR
Fear-based marketing is as old as advertising itself. Many companies have succeeded in scaring their customers into opening their wallets. But despite its proven effectiveness, there are limits to fear’s ability to sell. So, when is amping up your customers’ anxiety a good thing, and when will it just make them tune out? Fear inspires us to take action. When we’re worried about our finances, safety, relationships, or social acceptance, we want to eliminate the anxiety as quickly and painlessly as possible. Therefore, companies can effectively convince people to purchase a product by introducing fear and promptly providing a solution. But while fear motivates us, it’s not the only emotion we respond to. Advertisers have long understood the best marketing generates strong feelings among its audience,
and research shows emotional triggers are effective selling tools. But should you always target fear when other options are available? Relying on fear can turn off your potential customers. For a start, people don’t like to feel manipulated. We’ve all seen overblown fear-based marketing that suggests catastrophic consequences in a relatively low-stakes scenario. Generally, we roll our eyes and turn away. And at that moment, we lose faith in the company’s willingness to be upfront and honest with us. Further, too much fear numbs us, and we become complacent. When every commercial on TV or email in your inbox presents a new threat, we no longer feel heightened emotion — and we stop paying attention. Too much fear also gives way to disgust; some things are so awful we don’t want to think about them. Consider those infamous SPCA commercials
showing abused and neglected animals. They may inspire some people to give, but most of us change the channel. Meanwhile, other brands like Disney rely on nostalgia, togetherness, and joy and have seen excellent results. Of course, making people feel warm and fuzzy about car insurance or mold remediation is much more challenging. But many companies have succeeded by turning the usual message on its head and focusing on peace of mind instead of fear. While fear-based marketing can work, it’s easy to go overboard. Only use fear in moderation, and don’t forget to close with a message of hope. You want to leave your customers feeling empowered, not helpless or manipulated.
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