Questions to Ask When Negotiating a Deal
Almost every sale of a business involves a high degree of negotiation between buyers and sellers. In this article, we share some of the questions you can ask yourself to prepare for this part of the process. After all, optimal outcomes are typically only achieved through proper negotiation strategies. Keep in mind that one of the key strengths possessed by Business Brokers and M&A Advisors is expertise and skills in negotiating deals.
Can Both Parties Split the Difference?
If the buyer and seller can’t agree on a number, one negotiating tactic is to have them split the difference. This is a tactic that is simple to understand, and it shows both parties that the other is willing to be flexible. This reveals a good degree of goodwill and can serve to not only keep both parties talking, but also lower any pre-existing tensions. When both parties are still at the table, there is still hope that a deal can be reached. This tactic serves to continue the discussions and can often be highly beneficial.
Can the Buyer and Seller Better Understand One Another?
When it comes to good negotiations, one of the goals is for both parties to seek to understand one another. Sometimes a buyer or seller’s needs don’t even involve the numbers on paper. Instead, they may be seeking to adjust terms to make them more conducive to their overall goals. If you can keep an open mind and seek to better understand what the other party is ultimately looking for, it can go a long way in making the deal happen.
Can You Bring in a Professional?
There is an old saying that says “Never negotiate your own deal.” One of the benefits of bringing in a brokerage professional is that this third party won’t have the same level of emotional investment. This means that he or she can keep a neutral perspective and be more apt to see things from both sides. Sometimes a new perspective can work wonders. Further, a brokerage professional will understand the myriad of complex factors that must be successfully resolved before the deal is finalized. A Business Broker or M&A Advisor will have tips and techniques that can only be gained from years of first hand exposure to making deals happen.
Copyright: Business Brokerage Press, Inc.
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How Can You Tell If a Potential Buyer is Really Serious?
When you’re trying to sell your business, the last thing you want is to waste time dealing with buyers who aren’t qualified and are unlikely to actually make a purchase. After all, you will not want to reveal details about your business to someone who may be looking to take advantage of the situation. Let’s take a closer look at how you can weed out legitimate buyers from those who are just kicking the can down the road.
Legitimate buyers will ask the right questions. They will have a keen interest in your industry and are seeking to gain more information. They will also be likely to ask intelligent probing questions about your customer base and the strengths and weaknesses of your business.
The best buyers will also ask logistical questions about your inventory and cash flow. It goes without saying they will want to know details about profits that are generated. Real buyers will also be concerned about wages and salaries. Their goal will be to ensure that your employees are taken care of and will be unlikely to quit.
Another area that you can expect serious buyers to ask about is capital expenditures. They will evaluate any equipment and machines involved in the business. They will also likely inquire about inventory that is unusable due to the fact that it is outdated or problematic. After all, if they are truly planning to buy the business, they would inherit any headaches.
A good rule of thumb is to imagine yourself in the shoes of the prospective buyer. What kinds of questions would you ask? If you find that a buyer is only asking the bare minimum of questions that only scratch the surface, odds are that they are not really interested. You can expect the legitimate buyer to ask about everything from environmental concerns to details about your competitors.
The best way to evaluate buyers is to turn to the experts. Your Business Broker or M&A Advisor will have years of experience in talking to buyers and will have a leg up on evaluating who is worth your time and energy.
Further, you would likely be overwhelmed with the process of handling buyer inquiries while you are still trying to effectively run and manage your business. A good brokerage professional will handle your incoming inquiries and only notify you of buyers who are suitable, qualified candidates. They will ensure that the highest standards of confidentiality are held along the way.
Copyright: Business Brokerage Press, Inc.
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A Step by Step Guide to Selling a Bar in St. Louis
Perhaps the most famous bar in America is Cheers in Boston. The Cheers sitcom made the establishment more legendary than ever, portraying the ideal bar of people’s imaginations.
You understand how incredible that environment can be if you’ve ever owned a bar. But, just like Sam Malone, you may decide it’s time to sell your bar.
However, selling a bar is not as easy as it may sound. It requires a lot of work on your end, as you have to make sure the bar is a worthwhile purchase for a seller.
If you’d like to sell your bar business but don’t know where to start, don’t worry! In this guide, we’ll give you the essential information you need about how to sell a bar.
Preparation For Selling a Bar: Collecting Financial Records
When selling a bar, the first step is to get your affairs in order. First, collect your financial reports. The first thing any prospective buyer wants to know is that your bar business generates a profit.
Your financial reports alone won’t be enough to impress a buyer. You may not mind keeping all of your receipts in a small locker, but most buyers will be unimpressed with such a system.
These days, most businesses store their information in computer-based accounting systems. Start transitioning your books to electronic recordkeeping systems; this way, a buyer can trust that you store your records efficiently. In the mind of your prospective buyer, this means they won’t have to install an entirely new system right away.
Make Sure Equipment Runs Well
Another thing to do before you sell the bar is to ensure your equipment runs as it should. Even if you don’t use the equipment, it’s best to fix it or remove it. Having defunct items in a bar is a significant turn-off to prospective buyers.
As you examine your equipment, it’s also wise to remove any item that’s not a part of your sale. Over the years, you’ve likely accumulated personal items and memorabilia that make the place feel like home.
However, buyers assume that anything they see in the bar is a part of the sale. If you don’t want to part with these items, it’s best to move them out before buyers see the premises.
Iron Out Leasing Issues
When buyers see your bar, they expect to run it in its current location for the foreseeable future. However, for that to happen, your bar needs to have a viable lease.
If your lease runs out in a few months, or even in a year or two, it can halt the buying process. The buyer may not want to invest in a bar that they can’t guarantee will remain in place.
In many cases, this results in buyers turning their attention to more secure locations. So, before you talk with any buyers, make sure the lease still has plenty of time left on it.
Make Any Necessary Staffing Adjustments
This step may be the most important step in your preparation. Often, bar owners have strong relationships with their staff — you’ve come to see yourselves as a team.
However, a buyer doesn’t care much about your bar relationships. They want to know that your staff can run the bar smoothly and efficiently. If the answer is no, they may not buy the bar.
Alternatively, they may fire your staff without much mercy. So, if you have staff that underperforms, it’s in your best interest to let them go. If it comes from you, they may have an easier time recovering.
Interview Brokers and Choose Your Representative
The next step is to find a representative for your bar. This firm serves as the middle man between you and the buyer, relating information to both parties.
Perhaps the most critical service that brokers offer is valuing a business. When you interview brokers, it’s essential that you ask each candidate how much they believe your business is worth.
Generally, most candidates will give similar appraisals for your business. It’s often in your best interests to avoid outliers in these appraisals.
How do you know you can trust a representative in valuing a bar? It helps to check their credentials, such as the following:
- How many years have they spent in this business?
- What was the representative’s business background before selling restaurants?
- Are they licensed?
- How many restaurant listings do they currently have?
- How many restaurants have they sold?
- Do they have prepared contracts for buying a business?
- Do they have any references you can contact?
If they can answer all of these questions favorably, you can likely trust their judgment in valuing your business. From there, you’ll move to the next step.
Signing the Listing Agreement
Once you sign the listing agreement, follow these tips to help the process go more smoothly. First, run the bar as though you weren’t selling it. Don’t begin reducing hours or making other significant changes.
Likewise, keep the establishment clean and open for showings before and after hours. Return any phone calls or emails from your broker as soon as you can and check in with them for buyer feedback.
Review and Accept Offers
When it’s time to accept an offer you like, remember to work with the buyer. Give them a few wins in negotiations if you can handle them. Likewise, grant them the freedom to inspect the bar for health purposes.
Make sure your CPA is on board to offer any due diligence information as well. Lastly, we cannot stress enough that you shouldn’t make significant bar changes while under contract with a buyer.
If everything comes back favorably, all that’s left is to attend the closing and collect your check. At this time, you’ll turn over any keys, codes, and passwords to the new owner.
Start the Process of Selling a Bar
Selling a bar can take time. If you’ve determined to sell your establishment, start preparing today! Begin by collecting your financial records and making any necessary adjustments with the equipment.
Once you’re ready to find a representative, consider our services! We offer top-notch representation to bars and restaurants across St. Louis. We’ll be happy to add your establishment to our listings.
If that sounds like what you need, don’t hesitate! Contact us today to learn more about selling your bar business.
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How to Sell and Successfully Launch Your Retirement
Many business owners are emotionally attached to their businesses, and it is easy to understand why. Typically, business owners invest not only a considerable amount of time and money into their business, but a good bit of themselves as well. Owning and operating a business often becomes part of one’s identity. However, the fact is that no one will work forever, as retirement eventually comes for almost every business owner. With this in mind, it is important to prepare for selling your business well in advance.
Brokerage professionals can take your knowledge regarding your business, and use it to help you frame your business in the best possible light. Your expertise in your business can also help a broker find ways to improve your business so that it is more attractive to potential buyers. With all of this in mind, let’s turn our attention to the key steps you should take when preparing to sell your business and transition into retirement.
Select Your Second-in-Command
Any savvy buyer will want to know that the business is well supported by a capable team. Buyers rightfully worry about having a smooth transition period, and nothing helps dispel those fears like having a proven and capable second-in-command standing by. When selecting this important individual, it is important that you pick someone that understands how your business works and is a proven asset to its operation.
Automate, Automate and Automate
Buyers can be intimidated by taking control of a business. Having a proven second-in-command ready to assist is one smart step. Automating as much as possible is yet another prudent move. In short, you want your prospective new buyer to feel more confident about buying and operating your business.
Make a “Smooth Transition” List
As the seller, you have the critically important job of removing buyers’ fears. When you boost their confidence that they can successfully run your business, you increase the odds that your sale will go smoothly. Making a smooth transition list, which includes all the steps that you can take to improve the odds of a buyer being successful, is a smart investment of your time and effort.
A good transition list will include information about how to work with key customers, employees and vendors. You want to ensure that your customers, employees, and vendors understand that a sale will take place, but also understand that the process will be smooth and trouble-free. Whether large or small, take any steps that you can to show buyers that the transition will be well-received.
The average business owner has, in fact, never sold a business before, and is unprepared for this very complex process. Since the process of buying or selling a business is a very complicated one, they should strongly consider working with an experienced Business Broker or M&A Advisor who can help guide them through the process. Brokerage professionals are experts at buying and selling businesses. They understand what both buyers and sellers want and need. As a result, they can help you take the necessary steps to get your business ready to be sold.
Copyright: Business Brokerage Press, Inc.
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A Guide for Determining a Reasonable Price for Your Small Business
There is a considerable difference between determining the value of a privately-held company and a publicly-held company. Topping the list of considerable differences is the fact that privately-held companies do not have audited financial statements. Let’s look at how the owners of privately held companies should proceed in establishing a reasonable price for their company.
An audited financial statement is a costly endeavor. In order to avoid the cost, many companies simply don’t go public. Of course, it should be noted that publicly held companies, as the name indicates, reveal much more about their finances than their privately held counterparts do. Privately held companies are often seen as being more mysterious whereas publicly held companies are considered more “open.”
Business owners looking to sell their business will, of course, want to address the fact that their company lacks the public information associated with publicly held companies. Providing prospective buyers with as much verified information about your business as possible is one of the fastest and easiest ways to overcome buyers’ concerns. A smart move for any business owner is to work closely with their accountant to go over the numbers and create an easy-to-understand presentation for prospective buyers. This should serve to allay many of their concerns.
Working with your accountant is only the first step in providing prospective buyers with the information they need to feel comfortable. The second step is to work with an outside appraiser or other expert who can determine the value of your business. After that, you’ll want to decide on what your market price will be, as well as your “wish price,” or the price that you would ideally want. Third, you must know your “rock bottom” lowest price. You, as the owner, need to have this information as it will greatly facilitate and streamline all negotiations.
When buyers are reviewing materials and working to determine what price they are willing to pay, they will look at a wide range of factors including:
- Product diversity
- The size of your customer base
- Potential competitors in the area
- Competitors on the horizon
- Potential disruptions to your business, such as supplier problems
- The stability of your earnings
- The stability of the market
- Need for capital
Different buyers may place differing levels of emphasis on certain areas, but you can be certain that the aforementioned areas will be examined with care. The process is undoubtedly rather complex. This complexity underscores the need for professional assistance.
Ultimately, the market will determine the sale price of your business. For business owners, the first and most important step is to work closely with professionals such as accountants, appraisers, Business Brokers and M&A Advisors to establish the price of your privately held business. You can count on brokerage professionals to properly organize the facts and numbers that support that price.
Copyright: Business Brokerage Press, Inc.
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