Land The 'One That Always Gets Away'

Everything you want to know about skydiving you can find on the internet. To sum it up – jump out of the airplane, pull the cord, enjoy the view on the way down, stick the landing. Oh, did I forget the first step about making sure you had a well-packed parachute?

Everything you need to know about buying or selling a business is also on the internet, so why hire a business broker to assist you in such a transaction? Why not do it yourself? Recall that pesky question about a well-packed parachute!

So I asked myself “What other service areas do people hire professional guides?” Everything you want to know about fishing you can learn on the internet, yet many people hire fishing guides in search of landing the “one that always gets away.”  So I read why people hire professional fishing guides and found similar reasons to why you should hire a professional business broker.

1. A fishing guide is familiar with the lake, its structure, how the fish move, and what adjustments to make with changes in the seasons.  A guide will keep you on top of the fish. Similarly, as a business broker, I am familiar with the market, how it is structured, how buyers and sellers move, and how the market changes during the seasons. I keep you on top of buyers/sellers.

2.  A fishing guide fishes practically every day and is constantly learning the latest new tricks and techniques for landing the big one. They know what is working today and how subtle changes in presentation can make a big difference in fishing success. Likewise, I am constantly working in the market and know how buyers/sellers are reacting to everyday happenings in the industry. With the vast array of promotion media available, I quickly respond to various market channels to enhance the buying/selling presentation.

3.  A fishing guide on the water almost daily has a pretty good idea where the fish are biting. Often they can take you right to the spot on the first try so you can catch more fish in a short period of time.  As a business broker I know where buyers/sellers are, and have regular contact with many of them, often getting interest on the first try.

4.  How often have you hooked that fish of a lifetime and it was the “one that got away” because you were not sure how to play and land it. A fishing guide gives you personal instructions as you land the big one, so there will be no getting away. My key role is to guide you through the process of buying/selling a business, so you don’t make crucial mistakes that keep you from ‘landing’ the deal.

5.  Fishing guides often have equipment that most anglers have never seen, much less, used. Allowing you to try out different fishing rods, reels and tackle before you buy. I have a ‘tackle box’ full of skills and techniques for providing any analysis and procedure necessary during the process. It’s important that I provide sufficient comparative options for my clients to assess and choose from.

6.  The latest electronic gear (sonar, GPS, fish locators, etc.)  is getting more and more complicated. A fishing guide can provide additional instruction, tips and techniques for learning this equipment. Understanding business financials and tax returns can be a confusing task. It is my task to simplify the business operating statements and acquisition process to make it easy for the buyer/seller to understand from their perspective. I also provide valuable information prior to execution of the transaction to ensure each party is well informed.

7.  A fishing guide has a significant investment into their business – boats, motors, electronics, trolling motors, batteries, rods and reels, life vests, fuel, bait, repairs, insurance, maintenance and storage costs. When you look at replicating this cost to do it yourself, the cost of the trip doesn’t seem so prohibitive. The experience and knowledge investment into developing a brokerage business is very significant. Duplicating this basis is daunting cost, so hiring is an affordable choice.

8.  A good fishing guide knows you are there to relax and will do the work. Most guides will run the boat, tie your lines, bait your hooks, net and handle your fish, cook a shore lunch and/or send you home with packaged fillets. I guide you through the process to acquire/sell a business, tending to the details, while you enjoy the “fishing”.

9.  A fishing guide knows how to keep their client comfortable and safe in rough waters, and has the proper, well-equipped boat to do so. As an experienced business broker I know how to handle ‘rough waters’ in a deal, and keeps my clients safe (in a legal perspective) and comfortable – and have the proper channels to do so.

10.  A guided fishing trip done right is a great experience for whatever occasion.  My goal is to make the transaction for every client a great experience from beginning to end, with every client feeling satisfied they received good value for their time and money.

So whether you are looking to go skydiving, fishing or buying/selling a business, you can always look up how to do it on the internet and do it yourself. Or you can hire an experienced professional to guide the way. The results are not always the same, and you may walk away talking about the “one that got away”. However, I would rather have you talking about “the deal that was too good to pass up!” Call Compass Brokerage & Realty Services today to land the “Big One”! Your professional and experienced guide is waiting at 612-963-3810 or Brian@CompassBrokerage.Services.

The Best Opportunity to Buy!

What kind of buyer are you? Matching your skills to the needs of the business is important to ensuring the future success of the business. Although there are many ways to classify a business, one way I like to look at a business is through the perspective of cash flow. Understanding the skills of a buyer to manage cash flow becomes critical when matching that buyer to an acquisition.

When it comes to describing a business by cash flow, it is useful to compare the cash flow relative to sales respective to the industry average. In this manner one can determine if the acquisition is a good, better or best opportunity. Although these terms are rather trivial, the skills needed by an owner in each of these situations can be quite different.

In a ‘good’ opportunity the business is usually performing below industry expectations. Why is this good? A skilled turn-around buyer looks for good opportunities as they provide the best improvement potential at the lowest acquisition price. Using their turn-around skills a new owner can work to gain the benefits of higher cash flow from raising a good business (less than industry expectations) to a better business (meeting industry expectations).

A ‘better’ opportunity is a business that is meeting industry expectations and has opportunity for growth. Leveraging growth on existing overhead and relative capital increases the net profit margin, i.e. cash flow. A buyer skilled in increasing growth can take a better business and manage it into a best business by growing sales. A skill that is not trivial as it sounds.  Whether a buyer is ultimately looking for the additional cash flow that comes from growth, or the increased multiple that comes from reselling a best business, the gain can be significant.

In a ‘best’ opportunity a business is already producing cash flow above industry expectations. The previous and/or current owners have improved the business and managed growth to provide a higher margin on revenue than other businesses in their industry typically earn. A best business has the strongest options for financing, and support the debt structure while providing the buyer with a good earned income stream. In a best business a buyer can look to continue managing the business in its current state of performance (earning solid income), seek new growth opportunities, or leverage the “process” through replication into new markets.

Whatever opportunity you seek as a buyer, the success or failure of a business, as Marcus Lemonis continuously highlights on his reality show “The Profit”, can be broken down into three components – People, Product and Process. Ignore any one of these three and you can have something less than a ‘best’ business.

Fore!

Golf is always an interesting analogy to business performance in so many ways. First is the golf swing, one of the most crucial pieces of a golfer’s game, just as product is so crucial to a business. A second critical differentiator in the sport is how a golfer approaches their game, the same as how a business provides service to a customer.  These two factors alone can differentiate a pro from an amateur.

Swing and approach have a large impact on the overall game and the eventual score a golfer produces over multiple rounds. Through their game, season after season, the golfer becomes known as a scratch, par or bogey golfer; and sometimes like me, a “hack”. This analogy applies the same to a business, through its product and services customers respond and the business will perform relative to the industry. Here cash flow is the score one can use to determine if the business is performing well. We use better similar to a bogey golfer, good to compare to a par golfer; and best to reference a scratch golfer.  When seeking to acquire a business, it is important to understand not only the cash flow, but the cash flow relative to the industry – is this business performing good, better of best in class? 

The next question to ask is what is your acquisition strategy? Are you looking to purchase a scratch business (best) and continue its play at above par performance? Are you looking to acquire a bogey business and invest in the resources necessary to improve the swing and approach to turn its game into a contender? Or are you looking to buy a par business that has slightly less challenges where you can bring ideas and resources to step up its game to the next level? Each of these businesses will need a different pro willing to work on the specific challenges of the game.

Whatever challenge you acquire, constantly working on the six steps of swing and the 24 components of perfect technique, will put your game on track to becoming a scratch business.

Are You Too Small For Advice?

By common definition a ‘board of directors’ is a body of elected or appointed members who jointly oversee the activities of a company or organization. Most small businesses do not see or have a need for a body of members to oversee the company, this can usually be done by one person – the owner. This does not go to say that the owner of the company doesn't need advice now and then on operating the business. In today’s fast-paced business world with rapid changing technology and constantly changing economics, a smart business owner would be well served to seek expert advice on short and long term business plans and investments.

A small business owner is most likely already using the services of a tax accountant and attorney in the business. However how regularly do they use confidants who know their industry, who understand logistics and delivery, customer service and quality, technology, labor management or financial markets? When it comes to matters outside their area of expertise are they using trusted consultants to assist in making critical decisions?

A small business owner who assemblies a team of specialists in the various fields related to their business can find it very rewarding. Asking these specialists to meet together on a regular basis, say one to four times a year, can bring unexpected synergistic results. In order to gain maximum benefit from their energy, the owner should recognize and reward these specialists for their efforts. After all, the purpose of assembling this ‘board of advisers’ is to get the best advice possible to make the business better. Selecting the best people to do that and getting them excited about doing that is the owner’s job! When properly motivated and excited, the right advisers will return your expectations. Expectations that should trend towards the exponential versus the incremental.

No company is too small for advice. Success comes to those that seek it!

LOOKING-WANTING-NEEDING : A CHANGE PROCESS

There are many people in the market "looking" to buy a business, however do these people "need" a business? When it comes to acquiring a business there are three stages of buyer preparedness and a transaction does not occur until the buyer gets to step three. Many prospective buyers never progress past step one or two and a frozen in a perpetual state of desiring to become a small business owner, never making the crucial steps to become one.

The first step to becoming a small business owner is a desire for change. It may be unemployment, dissatisfaction with current job, a want for more money or independence, or just a view that the grass is greener on the other side. Desire is an easy emotion to engage and often kicks off an endless search of the advertisements for what businesses are available. Ad watching becomes an enjoyable past time. Lookers may even make a few phone calls and ask a few questions, but perpetual lookers do not buy businesses.

The next step is committing to change. Stepping from the world of nine to five into small business is likened to climbing Mount Everest. This may be an accomplishment you want to do in your lifetime, a sincere intention, but are you committed? Have you prepared for the journey? Have you worked to gain the necessary knowledge and experience to be successful? Many buyers rush into this step finding themselves ill prepared for the tasks ahead of them, hence they find ways not to buy and keep wanting to acquire a business. For wanters time is not of the essence when it comes to buying a business.

The final step is preparing for change. A buyer committed to buying a business has prepared themselves for the acquisition process. They have a plan laid out, knowing the steps they are going to follow to reach their objective. They have educated themselves on the industry they are planning to buy in. They are confident in their abilities to run the business. They know their financial status and capacity. They have formed a group of advisers and mentors to help them along the way. They have a true need and burning desire to succeed. Needers are ready to buy.

If you are bogged down in a perpetual state of looking or wanting and would like to to progress forward, click here to see what the SBA says about "Buying an Existing Business" and then let me help you prepare for change!

Buyer Representation

A prospective buyer seeking a business can gain significant benefit by using an intermediary to acquire a business. A business intermediary brings experienced insight and discipline to the acquisition process. The value of this insight can be significant in dollar savings, the difference between making good or bad decisions, and, most often, can be at no cost to the buyer (i.e. paid by the seller) if done correctly.

There are many value points a strong business intermediary can bring to a buyer.

• Expertise in determining the market value of the business.
• Strong understanding of financial documents.
• Negotiation skills.
• Process and procedural skills.
• Strengths, weaknesses, opportunities & threats (SWOT) analysis.
• Market opportunities.

If you are looking to acquire a business, your first step should be to contact an experienced business intermediary, before you start searching the for sale listings. It will save you time, money and mistakes!

Note in a business transaction, different than a residential transaction, a prospective buyer may end up relying on a seller's representative to provide them with the information they need to make an informed decision. Dual representation, often used in residential transactions, is not a common approach used in the business transaction and the seller's representative does not represent the buyer. The buyer's need for further representation will depend on the strength of the seller's representative and their capability to manage the needs of the seller and the buyer neutrally. If a buyer does not feel their needs are being met in a fair and competent manner, it is recommended they seek independent representation.

Brian Tjaden - The Biz Guy! 612.963.3810 www.briantjaden.com brian@calhouncompanies.com