The problem with 16 Hour Workdays - How to Sell a Business

I had the pleasure of speaking to a business owner in Toronto while I was away on vacation. It was just a brief consult done from a park bench in Brussels.

He and the other owners had become aware of a competing firm that had been acquired by a larger company and wanted to try to do the same thing.

The conversation centered around the best strategy… hiring an intermediary, hiring someone in-house to try to find a suitor, etc.

During this time, my client made a little comment about how he and the other founders of the company were working almost 16 hours a day and how they found it impossible to hire people to help them out.

I made this recording telling the story and how you can go about fixing it.  Listen here (audio only on YouTube): https://youtu.be/9n68EuvNXfw

Needless to say, it is quite difficult to convince someone to pay money to buy a business that needs this kind of management engagement.

Proper businesses have structure, organization and everyone knows what they’re responsible for and what duties they need to get done.  Without this, it’s impossible to grow and it sure does look scary for anyone looking at buying.

The topic was very apropos as I’m in the middle of creating my latest workshop; Building a Business that Someone Will Want to Buy.  It’s going to be presented on October 18 in Moncton, NB and will likely become an online course.

To learn how I can help you sell your business yourself, visit www.HowToSellMyOwnBusiness.com

For a full education and help on buying a business, visit www.BusinessBuyerAdvantage.com

Please remember to like and share this article, it’s the only way the people who run the internet have of knowing if the content is any good or not. The more you share, the more likely someone who needs this information will be able to find it.

If you would like to hear from me weekly before anyone else, you can sign yourself up just to the left of this post.  If you need my help with your project, give me a call at (506) 381-8416.

Do you live in the Maritimes?  I’ve got workshops coming up on buying and selling businesses in the fall.  Book now http://davidbarnett.eventbrite.ca

Thanks and I’ll see you next time. 

How to we evaluate buying PART of a business? How to Buy a Business

I received a question from one of my viewers in South Carolina.  Ben has an opportunity to buy part of a business and wants to know what he needs to do to figure out what it’s worth.

Splitting up businesses is a funny thing.  Usually businesses want to combine to realize synergies. 

Think of two companies merging and eliminating some of the administrative staff.  The result of the merger should be lower overheads as a percentage of sales.

I made this video to discuss what happens when you start splitting things up: https://youtu.be/zrKQWzxN58w

So if you buy part of a business and this leads to dis-synergies how do you figure out what a part of the business is worth?  Well, all you can rely on is the sales figure.

Start by taking the sales of the existing company for the department or product lines that you’re going to be acquiring, then build yourself a new income statement.

Be prepared for a tough negotiation though, the parts may often be worth less than the whole and the sellers expectations may be very different from yours.

For a full education and help on buying a business, visit www.BusinessBuyerAdvantage.com

To learn how I can help you sell your business yourself, visit www.HowToSellMyOwnBusiness.com

Please remember to like and share this article, it’s the only way the people who run the internet have of knowing if the content is any good or not. The more you share, the more likely someone who needs this information will be able to find it.

If you would like to hear from me weekly before anyone else, you can sign yourself up at www.DavidCBarnett.com  If you need my help with your project, give me a call at (506) 381-8416.

Do you live in the Maritimes?  I’ve got workshops coming up on buying and selling businesses in the fall.  Book now http://davidbarnett.eventbrite.ca

Thanks and I’ll see you next time. 

'Just put in more money' - The truth about increasing equity when buying a business - David C Barnett

The seller's accountant Says, ‘You just need to put more money in.’ 

I have a client who is negotiating for a business which is overpriced. 

He’s demonstrated that the business will not cash flow for him after servicing debt and taking a reasonable salary for the value of his work.

The seller’s accountant has said, ‘the buyer just needs to put in more of his own money.’

I made this video to show how that doesn’t make sense at all: https://youtu.be/vTsIwe_If88

It’s got a little math, but it’s not too difficult.

The point of the matter is that equity (a business owner or buyer’s cash) actually demands a higher rate of return than debt.

This is because it’s riskier.  Lenders get paid first in the event of a liquidation.

If you put in more of your own money, you actually need an EVEN HIGHER rate of return.

Watch the video.

For a full education and help on buying a business, visit www.BusinessBuyerAdvantage.com

To learn how I can help you sell your business yourself, visit www.HowToSellMyOwnBusiness.com

If you’d like to learn how to create high returns by making local private lending and lease deals, check out http://www.LocalInvestingCourse.com The Local Investing Academy enrollment is from September 26 to October 10 only. 

For a quick introduction, read Invest Local.  It’s available from Amazon stores worldwide or as a .pdf here: https://gum.co/quoB

Please remember to like and share this article, it’s the only way the people who run the internet have of knowing if the content is any good or not. The more you share, the more likely someone who needs this information will be able to find it.

If you would like to hear from me weekly before anyone else, you can sign yourself up at www.DavidCBarnett.com  If you need my help with your project, give me a call at (506) 381-8416.

Do you live in the Maritimes?  I’ve got workshops coming up on buying and selling businesses in the fall.  Book now http://davidbarnett.eventbrite.ca

Thanks and I’ll see you next time. 

What I see in the Market for Small Businesses - Buy a Business - Sell a Business

Well, spoiler alert, there is no market for small businesses.

I made this video to explain why. https://youtu.be/aOFhyYjFoYc

You see for a ‘market’ to exist, you need many buyers, sellers and a product or commodity.  For example, there is a market for 4-door used cars and a market for 3-bedroom homes in each town and city, but small businesses are very individual.  They’re unique.

Therefore, they each have their own market!

In the video I give an example of the process engineer who will never buy the highly profitable flower shop.  I used to see it all the time when I owned my business brokerage.

As far as pricing goes, it doesn’t change much over time except if certain industries are perceived to be more or less risky.  Business are valued on their cash flow and what the buyer is willing to pay is based on their perception of the risk that the cash will continue to flow into the future.

There is one exception though.  It’s an old story about market manipulation.

I’ve seen first-hand that government programs meant to encourage immigrant investors are causing price bubbles in certain categories.  Convenience stores, franchise food locations, Laundromats, gas stations.

Anywhere someone with limited English can run a simple business and quickly learn enough words to make change and serve customers.

I recently worked on a case where a newcomer was willing to overpay by 40%... because he was up against a time-limit and if he didn’t buy a business he would lose a $75,000 deposit that he had made to get into the country.

Welcome to Canada, let us into your wallet.  I bet he feels all warm and fuzzy about igloos, beavers and maple syrup.

Just like in any market where politicians and civil servants decide to meddle, an artificial urgency has been created and business sellers are taking full advantage of these victims created by government policy.

For a full education and help on buying a business, visit www.BusinessBuyerAdvantage.com

To learn how I can help you sell your business yourself, visit www.HowToSellMyOwnBusiness.com

If you’d like to learn how to create high returns by making local private lending and lease deals, check out http://www.LocalInvestingCourse.com The Local Investing Academy starts in September.  For a quick introduction, read Invest Local.  It’s available from Amazon stores worldwide or as a .pdf here: https://gum.co/quoB

Please remember to like and share this article, it’s the only way the people who run the internet have of knowing if the content is any good or not. The more you share, the more likely someone who needs this information will be able to find it.

If you would like to hear from me weekly before anyone else, you can sign yourself up at www.DavidCBarnett.com  If you need my help with your project, give me a call at (506) 381-8416.

Do you live in the Maritimes?  I’ve got workshops coming up on buying and selling businesses in the fall.  Book now http://davidbarnett.eventbrite.ca

Thanks and I’ll see you next time. 

Ed asks: What would David look for in a new franchise opportunity? How to Buy a Business - How to buy a franchise

Ed recently downloaded a copy of my 2015 Best-seller, Franchise Warnings from www.franchisewarnings.com

He wrote me an e-mail saying that he was looking at franchises and enjoyed the book.  He thought that the central theme of the book was ‘do your homework.’

It’s not.  The book’s purpose was to dispel the myth that buying a franchise is less risky than starting a business from scratch.  Watch the video here: https://youtu.be/JUItDU5cn-E

Ed also asks what I would look for if I were buying a new franchise.  Interesting question.

My first idea is that I would want a fee based franchise over a royalty based one.  It allows you to grow the business and keep more of the gravy for yourself.

Secondly, I would need to ensure that the business systems were actually provided and worked well.  I know of a two franchises who provide no operating manual and one where the systems are very poor. (I’m sure they’re not alone.)

For my third item, watch the video ;)

To learn more about buying a business, visit www.BusinessBuyerAdvantage.com

If you’d like to learn how to create high returns by making local private lending and lease deals, check out http://www.LocalInvestingCourse.com The Local Investing Academy starts at the end of September.  For a quick introduction, read Invest Local.  It’s available from Amazon stores worldwide or as a .pdf here: https://gum.co/quoB

Please remember to like and share this article, it’s the only way the people who run the internet have of knowing if the content is any good or not. The more you share, the more likely someone who needs this information will be able to find it.

If you would like to hear from me weekly before anyone else, you can sign yourself up at www.DavidCBarnett.com 

Do you live in Toronto or the Maritimes?  I’ve got workshops coming up for Toronto in September on buying and selling businesses and in October-December in the Maritimes.  Book now http://davidbarnett.eventbrite.ca

Thanks and I’ll see you next time. 

How to Buy a Business with NO MONEY- Should you? David C Barnett

How to buy a business with NO MONEY?

I’ve gotten some questions from viewers asking how they could buy a business with no money. 

There is a belief out there that if you can structure things correctly, it’s possible to buy a profitable business while using none of your own money.

I’ve done deals where a buyer borrowed all the money to buy a business, but they did so by putting up some personal assets as collateral.

I’ve done deals where a buyer gets a seller to essentially finance 100% of the purchase, but the buyer was using lots of their own money to improve the business with a short timeline to re-financing it. 

In both cases, we can hardly say that the buyers had ‘no money.’  They certainly had resources to help them make the deals happen.

I made this video to explain the different scenarios that someone might conceivably buy a business with no money and the dangers for the buyers and sellers in each. Watch: https://youtu.be/NVTgDT7Cc2g

In asset purchases, the danger for a buyer, even if there is no down-payment, is that there will be insufficient operating capital and you’d be in a cash flow crisis from day one.

In share deals, if there is a net-positive operating capital balance, the buyer could fleece the company and run away with cash and the seller would be left with nothing.  Who would put themselves in this kind of position other than a parent handing over a business to a child?

The one opportunity for buyers to get their hands on a business with ‘no money’ is usually when there is negative equity.  Watch the video to see my thoughts on this.

If you’d like to learn how to create high returns by making local private lending and lease deals, check out http://www.LocalInvestingCourse.com The Local Investing Academy starts in September.  For a quick introduction, read Invest Local.  It’s available from Amazon stores worldwide or as a .pdf here: https://gum.co/quoB 

Please remember to like and share this article, it’s the only way the people who run the internet have of knowing if the content is any good or not. The more you share, the more likely someone who needs this information will be able to find it.

If you would like to hear from me weekly before anyone else, you can sign yourself up just to the left of this post.

Do you live in Toronto or the Maritimes?  I’ve got workshops coming up for Toronto in September on buying and selling businesses and in October-December in the Maritimes.  Book now http://davidbarnett.eventbrite.ca

Thanks and I’ll see you next time. 

Why can’t a borrower offer the same collateral to many lenders?

I got a question from a viewer in Prince Edward Island the other day. 

He had read my 2014 best-selling book, Invest Local, and had a question about preparing information for a lawyer in order to register security on a lending deal.

Many people who are contemplating investing in a small business via making a secured loan often wonder how they can make sure the borrower isn’t offering the same collateral to more than one lender.

I made this video to explain how registries work and give a brief history of how they came to be. Watch: https://youtu.be/MeFAmvf6veE

The PPSR registries (or UCC registries) allow you to publicly record the fact that a certain piece of property has been pledged as loan collateral.  They’re the most versatile registries because you can record a lien on almost any kind of property (outside of real estate.)

The system is so straight forward that many local investors register their own security using online services.  This is in contrast to real estate registries which are strictly the domain of attorneys because they are so complex and every jurisdiction is unique.

I’ve done dozens of deals where I’ve registered myself, using a third party service provider,  as a lender in a PPSA database.  I’ve also done many lien-searches when investigating the purchase of used vehicles or equipment.

It’s critical to learn how this works if you want to deal in lending or used equipment because a lender’s rights under a lien don’t go away if the property is sold. 

Simply put, if you buy an RV and there is an outstanding loan secured against it and the loan goes into default, the lender can still take it to satisfy the debt whether you bought it or not.

If you’d like to learn how to create high returns by making local private lending and lease deals, check out http://www.LocalInvestingCourse.com The Local Investing Academy starts in September.  For a quick introduction, read Invest Local.  It’s available from Amazon stores worldwide or as a .pdf here: https://gum.co/quoB

Please remember to like and share this article, it’s the only way the people who run the internet have of knowing if the content is any good or not. The more you share, the more likely someone who needs this information will be able to find it.

If you would like to hear from me weekly before anyone else, you can sign yourself to the left of this post.

Do you live in Toronto or the Maritimes?  I’ve got workshops coming up for Toronto in September on buying and selling businesses and in October-December in the Maritimes.  Book now http://davidbarnett.eventbrite.ca

Thanks and I’ll see you next time.