LIVE- Robert Levin-Grow you smallbiz with outside Capital

Grow your small business with outside capital…

New Livestream guest- Robert Levin I’m happy to have Robert join me on a live broadcast. He has experience in private equity, rollups, growing business via investing outside capital from both sides of the table. Tune in and as we’ll be discussing how taking on capital partners changes EVERYTHING! This is a ‘must see event’ for anyone who anticipates being a high-growth business owner or someone who wants to find investors to finance a rollup. Be sure to join live so that you can ask questions, replay will be available. We’ll be going live March 17, 2025 at 1PM Atlantic Time and 12 Noon Eastern Time See you there! David C Barnett

Turning a Business Sale into a Retirement Annuity: A Win-Win Deal

When selling a business, most entrepreneurs focus on securing the highest possible price at closing. However, as one seasoned business owner demonstrated, seller financing can sometimes be the smartest financial move—benefiting both the buyer and the seller.https://youtu.be/rkdB8eLl6Xw

The Challenge: Selling a Business with Excess Land

As a business broker, I encountered a unique challenge: a business for sale that included over 100 acres of land. The problem? Only a small portion of the land was essential for business operations, meaning that the additional acreage inflated the asking price without contributing to the company's cash flow.

The seller, a 78-year-old entrepreneur, had dedicated his life to building the business but had little in the way of retirement savings. While he owned his home, he also carried some personally guaranteed business debts.

The Offer and an Unexpected Counteroffer

A potential buyer made an offer of $350,000, requesting the seller to finance half the amount ($175,000). But instead of simply accepting or declining, the seller countered with a surprising proposal: he would sell the business for $450,000, requiring only $100,000 down while financing $350,000 over 10 years at an incredibly low 2% interest rate.

This strategy was highly unconventional—typically, sellers aim to finance less, not more. However, the low interest rate made the deal irresistible to the buyer. Initially planning to cap his offer at $400,000, the buyer realized that with seller financing at just 2%, this deal was more affordable than traditional bank financing. The transaction was finalized.

The Seller’s Smart Retirement Strategy

After closing the deal, the seller explained his reasoning:

• Steady Retirement Income – Instead of receiving a lump sum that would earn less than 1% in a savings account, he secured a structured income stream over the next decade.

• Low-Risk Financing – The business’s valuable land, equipment, and buildings served as collateral, making the note relatively secure.

• A True Win-Win – The buyer gained affordable financing, while the seller effectively transformed his business sale into a reliable retirement annuity.

The Power of Creative Seller Financing

This deal highlights an important lesson: creative financing options can be mutually beneficial. If you’re considering buying or selling a business, understanding seller financing can lead to better outcomes for all parties involved.

Be sure to join my email list for exclusive tips and receive 7 FREE gifts at https://www.DavidCBarnettList.com.

How old should a business be before it is mature

 

***New Video Alert!

Would you buy a business that was one year old?

How about 10?

Where is the right age until we can be sure it’s likely going to last, especially under a new owner?

Let’s take a look in this week’s video: https://youtu.be/2GqBGLo9rrM 

Cheers

See you over on YouTube

David C Barnett

Premiere - Jed Morris Learning from Failed SMB purchase transactions

Learning from Failed SMB Acquisition Deals

New YouTube Premiere guest- Jed Morris.

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

Jed went from being a searcher to a suddenly excited rollup investor.

Then, things went very bad.

AND- he can’t discuss it!

Tune in and as we’ll be discussing Jed’s new book about the common reasons why small business buyers fail and why he can’t talk about the reasons surrounding his own business closure and bankruptcy.

This is a ‘must see event’ for anyone looking to buy a business.

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

Set yourself a reminder on YouTube here:  https://youtu.be/QVt2b7Jt1PA 

YouTube Premiere We’ll be live Monday March 10, 2025 1PM Atlantic Time and 12 Noon Eastern Time

See you there!

David C Barnett

Why Keeping It Confidential Is Crucial When Selling Your Business

 Selling your business is an exciting milestone, but one of the biggest mistakes you can make is letting the wrong people know too soon. Confidentiality isn’t just important—it’s essential to maintaining your business’s value and ensuring a smooth sale process. https://youtu.be/m0wWErgtlM0 

Why Is Confidentiality So Important?

When word gets out that a business is for sale, stakeholders often assume the worst. Even if your business is thriving, this misconception can create instability and impact operations. Let’s look at how different groups might react:

1. Employees May Leave

Your team is one of your most valuable assets. If employees fear uncertainty, they may start looking for new jobs—especially if competitors try to poach them. Losing key personnel can disrupt daily operations and decrease your company’s value.

2. Customers May Hesitate

Loyal customers may reconsider their relationship with your business. If they worry about ownership changes affecting service quality, they might choose to take their business elsewhere. For instance, would you book a long-term contract with a service provider if you weren’t sure who would be running it next year?

3. Suppliers May Change Terms

If suppliers hear about a potential sale, they might tighten credit terms or hesitate to renew contracts. This could impact your ability to operate efficiently, making your business less attractive to potential buyers.

4. Lenders May Reduce Support

Financial institutions may view a sale as a risk factor. This could lead to reduced credit lines or even demands for immediate loan repayment, adding financial strain at a critical time.

5. Competitors May Exploit the Situation

Your competitors won’t hesitate to use your business sale as leverage. They might attempt to poach your clients, spread uncertainty about your business’s future, or undermine your credibility in the marketplace.

How to Maintain Confidentiality During a Business Sale

To protect your business’s value, you must have a solid confidentiality strategy in place. Here are the best practices to follow:

1. Work with Experienced Professionals

Hiring a business broker or M&A advisor ensures your business is marketed discreetly and only to serious buyers.

2. Use Non-Disclosure Agreements (NDAs)

Before sharing any sensitive details, ensure potential buyers sign an NDA. This legally binds them to confidentiality, reducing the risk of leaks.

3. Limit the Information You Share

Disclose critical financial and operational details only to qualified, vetted buyers who show genuine interest and financial capability.

4. Control the Timing of Announcements

Keep discussions private until the sale is finalized. Only key personnel who need to know should be informed at the right stage of the process.

Final Thoughts

Selling a business is a complex process that requires careful planning and discretion. Keeping the sale confidential safeguards your company’s value, ensures stability, and prevents unnecessary disruptions.

Want a step-by-step guide on how to sell your business successfully? Check out my bestselling book, How to Sell My Own Business, and learn how to navigate the process while protecting your hard-earned value. 

Be sure to join my email list for exclusive tips and receive 7 FREE gifts at https://www.DavidCBarnettList.com.

A great Interview with the Host of Resilient in Business Podcast Jad Atwe

 

In this episode, David Barnett shares his extensive experience in business acquisitions, discussing the intricacies of buying and selling small businesses. He emphasizes the importance of understanding cash flow, the role of business brokers, and the common pitfalls that both buyers and sellers face. David also highlights the significance of preparing a business for sale and the impact of financing on business transactions. Throughout the discussion, he provides valuable insights into evaluating business opportunities and the realities of entrepreneurship.

12 ways to learn about an industry before you buy a business

***New Video Alert!

If you don’t know what’s going on, the seller will train you, right?

Well, it might be too late by that point.

You should know something about an industry before you buy a business.

This week, I share a dozen ways you can improve industry knowledge before you buy a business that is doing something new for you.

Check it out right here: https://youtu.be/lAyI0kJLaEo 

Cheers

See you over on YouTube

David C Barnett

2025 PREMIERE- Ryan Chute duscusses Advertising for Home Services Companies

Better advertising for your plumbing, HVAC, Electrical, etc business…

New YouTube Premiere guest-> Ryan Chute.

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

Ryan has years of experience in advertising and is a Wizard of Ads partner.

Tune in and as we’ll be discussing better advertising strategies for home services businesses and playing some of his customer-winning ads for you to hear.

This is a ‘must see event’ for anyone seriously trying to build a brand in a market.

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

Set yourself a reminder on YouTube here: https://youtu.be/Hp-iwyFHIZ0 

YouTube Premiere We’ll be going live Monday March  3, 2025 at 1PM Atlantic Time and 12 Noon Eastern Time 

See you there!

David C Barnett

Understanding Small Business Valuations: A Deep Dive into the Most Probable Selling Price (MPSP) Report By Advantage Liquidity Partners Limited

Today, we're exploring small business valuations, focusing on the Most Probable Selling Price (MPSP) Report—a vital tool for small business owners contemplating a sale or other significant transaction. At Advantage Liquidity Partners Limited, we specialize in machinery, equipment valuations, and small business evaluations, ensuring you understand your business's worth in various scenarios. https://youtu.be/hzSC5hJRWnA

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What is an MPSP?

The Most Probable Selling Price (MPSP) is a comprehensive analysis of a business's financials and qualitative factors. We evaluate:

• Historical financial statements

• Business longevity and growth prospects

• Market positioning and location advantages

• Industry benchmarking using private transaction databases

Benchmarking helps us compare your business to industry peers. For instance, when assessing a dry cleaning business, we analyze how its gross margin and operating costs stack up against similar businesses in the market.

MPSP vs. Traditional Appraisals

Unlike appraisals, which assume an all-cash sale, the MPSP accounts for typical small business transaction terms involving:

• Seller financing

• Clawbacks

• Contingent payments tied to performance benchmarks

Since most small businesses aren't sold for full cash at closing, our approach reflects real-world scenarios, ensuring more accurate and practical valuations.

How Do We Prepare the MPSP Report?

1. Financial Data Collection and Normalization

We begin by inputting financial information, focusing on income statements and balance sheets. Next, we normalize these financials to reflect a standard operating scenario. For example:

• Owner compensation adjustments: If an owner pays themselves above-market wages, we recalibrate to fair market rates.

• Rent adjustments: If the business owner also owns the property, we adjust rent to reflect market rates.

• Family involvement adjustments: Recasting wages for family members involved in the business.

2. Transaction Structure Considerations

We analyze the transaction type—asset sale or share sale—as it impacts valuation. For example:

• Asset Sale: Typically excludes operating capital. Sellers retain receivables and payables.

• Share Sale: Might involve retaining debts or adjusting for cash-free, debt-free scenarios.

Benchmarking and Industry Comparison

We benchmark:

• Cost of Sales

• Wage Levels

• Occupancy Costs

Comparing these metrics against industry averages helps highlight over- or under-performance areas, providing valuable insights for potential buyers and sellers.

Valuation Methodologies

We use a combination of valuation methods, each weighted for accuracy:

• Income Approach: Based on historical and projected earnings.

• Market Approach: Compares similar business sales.

• Cost Approach: Focuses on asset replacement costs.

In a recent case, we weighted two market approaches at 40% each and the income approach at 20%, reflecting industry standards and business specifics.

Forward-Looking Projections

Projecting future performance is crucial. We assess:

• Expected sales growth (e.g., inflation-based growth rates of ~4%)

• Direct and indirect cost trends

• Required capital expenditures and operating capital needs

Qualitative Factors and Key Value Drivers

Beyond numbers, qualitative factors influence valuations:

• Historical Profitability: Consistency in earnings

• Income Risk: Stability of revenue sources

• Growth Potential: Market expansion opportunities

• Owner Dependence: Business reliance on the owner

• Location & Marketability: Desirability and accessibility

Businesses with strong qualitative attributes often command a premium.

Final Valuation Summary

In one evaluation, the final enterprise value was determined at $236,000 (asset sale basis), adjusting for a required net working capital of $10,000, resulting in a final value of $226,000, including inventory.

Important Notes:

• Real estate is valued separately and requires a commercial real estate appraisal.

• Transaction terms significantly affect final valuations.

Final Thoughts

Understanding your business's value is crucial for informed decision-making. Our MPSP report not only provides a reliable selling price estimate but also highlights improvement opportunities to maximize your business's worth.

For more insights on buying, selling, and building businesses as well as 7 FREE gifts, sign up for our email list at www.DavidCBarnettList.com