Monday, July 15, 2024

LIVE Neal Isaacs - Seller Journeys with Business Brokers

 



Business Seller’s Journeys with Business Brokers

New Livestream guest-> Neal Isaacs

I’m happy to have Neal join me on a live broadcast.

Neal has sold dozens of businesses in his role as a business broker with VR Business Brokers in Raleigh, NC.

Tune in and as we’ll be discussing what ideally a broker should be telling/showing/helping sellers with and we’ll hear some of his stories from the trenches.

In particular, I’m going to ask Neal about how, as a broker, he views his inventory of businesses for sale.

This is a ‘must see event’ for any small business owner who might want to sell one day.

ESPECIALLY if you want to learn how to spot the tells of a qualified broker vs. a poseur.

Be sure to join live so that you can ask questions, replay will be available.

Set yourself a reminder on YouTube here: https://youtube.com/live/-7vt5Ef-9i8 

We’ll be going live NOW! July 15, 2024 at 1PM Atlantic Time and 12 Noon Eastern Time

See you there!

David C Barnett


Saturday, July 13, 2024

David Barnett’s Top Five Tips for Small Business Success

I was invited by a small business lending website to share my top five tips for small business success. I’ve discussed these in various podcasts and thought it was a great opportunity to compile them all in one place. So, without further ado, here are my five tips for achieving success in your small business: https://youtu.be/hjJUly_MLBQ


1. Know Your Gross Margin

Understanding your gross margin is crucial. It’s the foundation of your business’s financial health. I once worked with a craft manufacturer who sold products at fairs and markets. He didn’t realize he was operating in three different business models—manufacturing, distribution, and retail—each with different margin expectations. By breaking down the margins for each level, we found that he was more successful as a manufacturer and distributor than as a retailer. This analysis allowed him to focus on building wholesale accounts rather than retailing, significantly improving his profitability. Always ensure you know the margins you should be achieving and monitor them closely.

2. Reconcile Your Books Monthly

Having a robust system for monthly financial reconciliation is essential. One of my clients, who buys and installs products, struggled with margin discrepancies because they only did inventory quarterly. This delay made it hard to track their true cost of goods sold. By implementing a better inventory system, they reduced the time spent on inventory from a full day to just an hour and a half, allowing them to reconcile their books monthly. This timely tracking ensures they stay on top of their margins and make necessary adjustments quickly.

3. Understand the Difference Between Debt and Equity on Your Income Statement

Though debt and equity typically appear on the balance sheet, understanding their impact on your income statement can offer valuable insights. Think of debt as a fixed obligation—like paying an employee a wage, which you owe regardless of their productivity. Conversely, equity, such as a commission-based salesperson, is only compensated when they generate value. By leveraging this concept, you can structure your business to minimize fixed costs and maximize performance-based expenses, enhancing your financial flexibility.

4. Maximize Return with Minimal Investment

Big companies excel at leveraging other people's capital and resources. For example, instead of purchasing real estate, they often lease to utilize the landlord’s equity. A client of mine wanted to open a second automotive repair location but was concerned about the high equipment costs. I suggested they lease a nearby space and use it for estimates and customer service, while performing repairs at the original location. This approach allowed them to expand without a significant upfront investment and minimize their risk if the new location didn’t succeed. Always look for creative ways to achieve your goals with less capital.

5. Understand the Customer Journey

Knowing what drives your customers to choose your business is vital. Back in my corporate days, I encountered a small-town restaurant that didn’t accept American Express. As a result, I had to go through a cumbersome expense process, which discouraged me from returning. The restaurant owner likely focused on food quality and cleanliness, but overlooked the inconvenience caused to customers by not accepting certain payment methods. Always consider the entire customer experience, from their perspective, to remove barriers that might deter them from choosing your business.

Final Thoughts

I hope you find these tips helpful. If you enjoyed this, make sure you join my list so you’ll never miss any of my new content online: www.DavidCBarnettList.com 

Cheers!

David C Barnett


Friday, July 12, 2024

2023 HC#005 JB needs help finding a biz for sale video

 


HC#005 JB is frustrated by not being able to find a good small business to buy. If you feel the same, you’ll want to listen to this. I break down proprietary search, broker channels and what a hard-working buyer needs to know about finding deals and why it can take so much time. If it was easy, everyone would do it. This is the least-transparent market on Earth and there are gems for those who aren’t afraid to invest time and money.

2023 HC#005 JB needs help finding a biz for sale video

 


HC#005 JB is frustrated by not being able to find a good small business to buy. If you feel the same, you’ll want to listen to this. I break down proprietary search, broker channels and what a hard-working buyer needs to know about finding deals and why it can take so much time. If it was easy, everyone would do it. This is the least-transparent market on Earth and there are gems for those who aren’t afraid to invest time and money.

Wednesday, July 10, 2024

Get into Biz 101 Ep 1 Integrity

 


***New Video Alert!

If you’re going to be in business for the long term and grow, you need customers who think highly of you.

This means they’ll refer you and buy again.

But you’ll never have this if you lack this one crucial element… Integrity.

I’ll show you how to maintain it in this week’s video:  https://youtu.be/hR-y5ceSjB0 


Cheers


See you over on YouTube

David C Barnett


Monday, July 8, 2024

Live From small time crook to big league Wall St. Fraud! Author Gary Weiss

 


From small time crook to big league Wall St. Fraud!

New Livestream guest-> Investigative Journalist and Author Gary Weiss

I’m happy to have Gary join me on a live broadcast.

Gary is the author of RETAIL GANGSTER: The Insane, Real-Life Story of Crazy Eddie.

Tune in and as we’ll be discussing the evolution of this small business person from a typical local small business owner to a big time Wall St. fraud artist.

This is a ‘must see event’ for anyone interested in business and crime!

You want to learn about Crazy Eddy’s frauds especially if you’ll be doing due-diligence on a business you might purchase.

Be sure to join live so that you can ask questions, replay will be available.

Set yourself a reminder on YouTube here: https://youtube.com/live/8-C5y26Hi6g 

We’ll be going live Monday July 8 2024 at 1 PM Atlantic Time & 12 Noon Eastern Time

See you there!

David C Barnett

Saturday, July 6, 2024

How to Buy a Cash-Heavy Business with Unreported Income

 Today’s question comes from Jolson, who is negotiating to buy a cash-heavy business like a laundromat or dry cleaner where the seller doesn’t report all the income. Jolson wants to know how to make an adequate presentation to the bank to get a loan for this business, given the incomplete financial records. https://www.youtube.com/watch?v=8pVgc2u07pU


The Unreported Income Dilemma

First off, Jolson, you’re facing a common issue in cash-heavy businesses. Owners sometimes pocket part of the revenue without declaring it, aiming to reduce their tax liabilities. This practice, while not recommended, does happen. The challenge for buyers like you is that the financial statements don't accurately reflect the business’s true income, making it difficult to secure traditional bank financing.

Why the Bank Won’t Help

You’re correct in assuming that banks rely heavily on accurate financial statements to assess the viability of a loan. When the reported income is incomplete, the business appears less profitable and riskier, making it "unbankable." In this scenario, presenting these financials to the bank is not an option because the bank will likely reject the loan application.

Vendor Financing: The Solution

While traditional financing may be off the table, you can still make a deal to buy the business. The key is vendor financing. Here’s how it works:

  1. Negotiation: Explain to the seller that their practice of underreporting income makes it impossible for you to secure a bank loan. This is a critical realization for the seller to understand that all potential buyers will face the same hurdle.

  2. Vendor Take-Back (VTB) Financing: Propose a deal where the seller finances a significant portion of the purchase price. This means the seller loans you the money to buy the business, and you pay them back over time.

  3. Sales Warranties and Protections: To protect yourself, structure the deal with sales warranties. This ensures that if the seller’s claims about the unreported income are false, you have recourse. For example, you could adjust the purchase price if the actual income doesn’t match the seller’s assertions.

Practical Example

I’ve helped clients in similar situations. For instance, a client purchased a pizzeria where the owner was pocketing cash receipts. We used vendor take-back financing combined with sales warranties to protect the buyer. This approach provided confidence in the transaction and safeguarded the buyer’s interests without needing to rely on court actions.

Running the Business Legally

Once you own the business, I highly recommend operating it transparently and legally. Declaring all income not only ensures compliance with tax laws but also provides accurate financial records that can be invaluable if you decide to sell the business in the future.

Final Thoughts

Jolson, buying a cash-heavy business with unreported income is challenging but not impossible. Vendor financing offers a viable solution, allowing you to negotiate a fair deal while protecting your investment. For a deeper dive into buying businesses and structuring deals, consider taking my online course, Business Buyer Advantage. It’s a comprehensive guide that has helped hundreds of people and offers a 30-day money-back guarantee.

If you have further questions or need personalized advice, feel free to book a session with me. 

Many clients have found it extremely helpful, and you can read their reviews on the site.

Thanks for your question, Jolson, and good luck with your business purchase! Don’t forget to subscribe to my email list at www.DavidCBarnettList.com 

Cheers