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American Business Brokers & Advisors Founder & President MERGERS & ACQUISITIONS BUSINESS VALUATIONS
APRIL 2024
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value of their homes and vehicles are but don’t know what the value of their business is, which is, most likely, the largest financial asset they own. Instead, they are clueless about the value of the business that feeds them and their family. This can be explained in a situation recently where I was meeting with a prospective seller, and they were interested in selling their 14 convenience stores. Before my company could be engaged to represent the owner of the 14 stores, they needed to provide us with financial information about the stores, and we needed to visit the locations and get to know the stores regarding the quality of the assets and where the stores were located. In other words, we were not doing what some people call a desktop valuation, where someone sits in an office and never visits the locations and then gives you a number of what they think the stores are worth without ever seeing the stores. After we had done our review of the numbers and the stores, I sat down with the owner of the stores, and we began to play poker. By playing poker, I mean I have in my hand what I think the stores are worth, and the owner has in their hand what they think the stores are worth, and we are going to see who goes first. It was decided that I would go first and show my hand. I said I believed the 14 stores were worth between $32 million and $34 million. Then the owner said he thought they were worth $50 million. This amount of difference is unreal because, having done hundreds of market valuations, I pride myself on generally being within 90% correct as to what a group of stores will sell for. (No, I am not bragging — I have done this for so long, 20-plus years, that I think I know the business pretty well). I looked at the owner and said there is no way we could be that far off. I asked him where they came up with the $50 million number, and they said an unsolicited buyer had offered that amount to them. My immediate response was, “Then why didn’t you
take the buyer’s offer instead of talking to me?” The owner responded that they did accept the $50 million offer, but after they got into doing the transaction, the deal fell apart, which is why they called me. At this point, I understood why I was talking to this individual, but I still wanted to know where anyone could come up with a valuation number so far from what I had come up with. So, I asked the owner of the 14 stores if the prospective buyer had done the same kind of due diligence my company had done on the stores, and their response was no, they had not. They said the previous buyer had looked at some of the numbers of the business, but then I discovered the previous buyer, who had thrown out the crazy number of $50 million, had not reviewed all financial statements of the stores, which is one of the reasons the deal fell apart. The moral of this story is that we had a business owner with a very successful business they had owned for a lot of years, who was approached by an unqualified buyer throwing out an unrealistic purchase price, which caused the owner of the stores to spend money with attorneys trying to accomplish something that was not going to happen. It also took a toll on their office staff, breached confidentiality, and affected their operations — all because they did not know what their business was worth. The situation could have been avoided if they had only asked what the business is worth in today’s marketplace. The good news is that I was able to get everything for their 14 stores put together, find a buyer who was financially qualified, and get the stores sold at a very good price for both the buyer and the seller. At American Business Brokers & Advisors, we do market valuations all the time. We don’t charge to do a market valuation, and there is Continued on Page 3 ...
Beware the Naked Man Who Offers
You His Shirt Trust, but Verify
“Beware the Naked Man Who Offers You His Shirt” was a book written by Harvey Mackay in the 1990s in which he explained how to work in business and deliver more than you promise and how to take care of the customer. The title was based on an old African proverb that says you should not always believe everything someone is telling you. Ronald Reagan, our 40th president of the United States, had a saying, “Trust, but verify.” He used it often in situations where the other person in the conversation would be telling him to trust him, but he wasn’t sure they were telling the truth. In my world of doing mergers and acquisitions, we would call this a “bait and switch” technique of offering a business owner a large purchase price only to come back later and reduce their offer. This proverb and book title come into play more often than you would think in our daily lives of doing business and especially in my world of working with business owners and buyers and sellers. We all want to be told the truth and then take the information we have gotten and make our decision and get on our way. When I refer to “get on our way,” in this context, it means we are in a hurry, and we fail to do the proper due diligence needed to come to an informed decision. Recently, I did a webinar with a major convenience store magazine that offered me the opportunity to share one of my pet peeves about business owners who generally know what the
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STRATEGIES FOR DEALING WITH SOCIAL SECURITY REDUCTIONS Secure Your Future for Peak 65
• DIVIDEND STOCKS OVER BONDS: Dividend equities are more tenacious in the face of inflation than bonds, as some companies adjust their dividends to compensate for it. • ANNUITIES: Annuities, generally paid by life insurance companies, can bolster your income during the impending retirement crisis. There are many types of annuities, so it’s best to speak to a professional before investing. • MAKE A TAX PLAN: Tax breaks from 2017 expire in 2024 and 2025, so planning ahead is essential. These benefits may be extended but now is the best time to start saving. While retirees may face uncertain monthly payments from Social Security, it’s possible to supplement income through other avenues. Even in a volatile market, you can make wise investment choices to help weather Social Security issues. The best thing to do is speak with a professional about your retirement goals and options.
More people have reached 65 this year than ever before. And by 2030, 1 in 5 Americans will be at retirement age. This large influx of retirees will substantially impact many Americans, not just boomers and Gen Xers. When Social Security was first implemented, the average life expectancy was 20 years lower than it is now, and Social Security simply doesn’t have enough funding to cover the “silver tsunami” of baby boomers now retiring. The Social Security Administration estimates that the fund will pay 100% of benefits until 2033. Anything beyond 2033 is uncertain, as policymakers have yet to introduce a comprehensive plan. Moreover, the number of contributors to the program — younger workers — isn’t keeping up with the increasing numbers of new Social Security beneficiaries. No matter how Congress proposes to shore up the system, it will have challenges. With this situation in mind, retirees need long-term financial strategies going forward. The best way to surmount these challenges is through clever investment.
Never Too Old to Learn Something New
PROFOUND STATEMENT
I talk to a lot of people, and I love listening to people talk because I was taught that God gave you two ears and one mouth for a reason, and that is because you can’t learn anything with your mouth open. Now rest assured I am a talker, too. That’s probably why I am in sales and enjoy people. And the great thing about talking with a lot of people is you never know what is going to come out of their mouths. I have learned as time has passed and I have gotten older that the filter between my brain and my mouth has almost completely disappeared. You know when you are thinking something, and you know you should keep the thought to yourself, but instead your mouth opens and out comes the thing you were thinking that you were not supposed to say? That is what I am talking about: The filter between your brain and mouth has disintegrated to almost nothing. I have also learned that just when I don’t think I can be shocked by something someone has done or said, I end up being shocked. It is like I never thought of that, and that is about the dumbest thing I have ever heard or seen — which proves we are never too old to learn something. But I was talking with one of my clients the other day, and he said something I would qualify as “profound.” Because when something is profound, it is considered to be of deep thought and insightful. It also made me stop and think.
Not to digress, but Albert Einstein made a profound statement about people and thinking. He said there are three kinds of people who think: those who think, those who think they think, and those who would rather die than think. The profound statement my friend shared with me was, “It is better to want what you don’t have than to have what you don’t want.” It makes you think, doesn’t it? I would be curious to hear what you think of this profound statement. Let me know at Terry@TerryMonroe.com .
–Terry Monroe
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SUDOKU (SOLUTION ON PG. 4) Take a Break!
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"HIDDEN WEALTH" The Secret to Getting Top Dollar for Your Business
► 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.
... continued from Cover no obligation to the business owner. We do the market valuation in a confidential manner because we want business owners to know what their businesses are worth in the hope that, someday, if they decide to step away from the business, they will return to us to use our services. It is a very simple understanding we have with business owners — the same principle that has helped us be as successful as we are. Please take my advice on this issue whether we get the opportunity to work with you or not. Find out what your business is worth in today’s market to avoid the situation I explained. And who knows? You may be pleasantly surprised as to what your business is worth in today’s marketplace. TERRY’S QUOTES OF THE DAY “Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time.” –Thomas A. Edison “Believe in yourself. You are braver than you think, more talented than you know, and capable of more than you imagine.” –Roy T. Bennett “Time is more valuable than money. You can get more money, but you cannot get more time.” –Jim Rhon
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GARDEN KITE RAINBOW SHOWERS
–Terry Monroe
BASEBALL CHERRIES
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INSIDE 7824 Estero Blvd., 3rd Floor Fort Myers Beach, FL 33931 1 2 Know What Your Business Is Worth Thrive Amidst Social Security Adjustments
Sudoku Solution
This Is Why We Have 2 Ears and 1 Mouth
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Thinking About Selling Your Business in 2024?
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How to Be a Successful Executor
Tips to Avoid Major Missteps HOW TO SUCCEED AS AN EXECUTOR
If you’ve been named the executor for someone’s last will and testament, you’ve been entrusted with the responsibility of carrying out a person’s last wishes. This honor — and legal responsibility — means you must take care of financial obligations, including paying any outstanding debt or taxes, and then properly dispense the remaining assets according to the directions in the will. The person who chose you to be executor trusts that you can handle this responsibility, so we’re here to walk you through the process and clear up any questions you may have. If you are listed as the executor or the trustee in someone’s estate planning documents, you should do a few things immediately upon their passing. First, you must secure their home and any other property as quickly
as possible. This involves maintaining any property until the estate is settled, including changing the locks. Often, family members will try to go into the house after someone passes away and remove items. As the executor or the trustee, you have to ensure this does not happen, which is why changing the locks could be crucial if the family situation is contentious. Next, you should locate all relevant estate planning documents and then determine whether the estate must go through probate. You will need multiple copies of the death certificate for banks, credit card companies, and insurance. Other important documents you will need include insurance policies, credit card statements, investment account and pension statements, and contacts for attorneys and accountants.
Give yourself time to review these documents carefully. Once you understand the estate plan, you can call a meeting with all involved to review the deceased family member’s instructions on how to distribute the assets. Being prepared and proactive will ensure you carry out your duties as an executor with precision and honor the person who entrusted you with this duty.
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