Most business owners simply don’t sell their businesses to get immediate cash. As something that would otherwise earn a constant income for them, businesses are only sold when necessary. How do you then navigate around the market of buying and selling an unimpaired and lucrative business?
In this episode, David Barnett talks about his insights on buying and selling businesses. As a business broker himself, he discusses his experiences with clients that either want to buy a business but shouldn't or not want to sell a business but should. He also provides business advice for entrepreneurs that are struggling to get on a certain level of success and profitability. Join us and learn more about the dos and don'ts of buying and selling businesses.
About Our Guest:
David Barnett is a business expert and best-selling author. As a former financing broker for 20 years, he understands the ins and outs of the business broker industry. David is also a project coach and consultant to business owners who want to either buy or sell a business. Equipped with years of knowledge and experience, he has written over six books about business and continues to provide valuable content through various workshops and online courses.
The Dos And Don'ts of Buying and Selling a Business
- He did not learn much entrepreneurship from his parents
- David has always been business-minded as a teenager
- He studied business in university but didn’t see entrepreneurship.
- He took a job in the yellow pages, met various business owners, and learned new business models.
- David became a finance debt broker after selling a business he built with his friend.
- He’s the first person to earn a certified designation in his hometown.
Experience as a Business Broker
- He sold 35 companies in 3 years but had months of challenges and no cash flow.
- Business brokerage is either feast or famine, even worse uncertainty than real estate.
- He quit and got a full-time job but came back to selling businesses from a phone call.
- You have no control from deals falling apart. Moreover, external factors such as banks, regulatory agencies and the government could ruin your deal.
Terms of Buying a Business
- "The terms are more important than the price."
- Most businesses are not sold on cash terms
- Payments could be made over time with interest and vary per business.
- Some have royalty-like terms, which could be good for both the buyer and the seller as they support and mentor each other.
Mistakes When Buying a Business
- Buyers fail to recognize the difference between the value of their labour and the return on their investment
- Most are financial buyers; those who try to replace their income from their job
- In essence, buying a business is like buying a job and making an investment at the same time
- You should not undervalue your labour and overvalue your business
Considerations on Buying and Selling a Business
- Buying a Business
- Maintain a fair market wage to support your family
- Be able to service debt
- Have an adequate cash return on your investment
- If you want a good deal, you have to have a plan
- Quantify the qualitative things in your business
- Some people have buyer's fever, which romanticizes their idea of the business
- Be detached when you make deals
- Selling a Business
- People don't sell businesses to "cash-out." They sell when they need to
- Analyze your resources and your potential industries.
- Maintain relationships for a good deal in case you need to sell.
- The majority of businesses are privately sold because they don't want to pay a commission.
- You need a surplus on your fair market wage to know that there is a return of investment.
- People become personified with their business, but you shouldn’t.
- Be objective.
- Try to sell a business as fast as possible.
Business Advice for Entrepreneurs
- Be honest with yourself.
- Know your value.
- If you operate a business and you earn the same as if you worked for somebody else, it's not a business but a job.
- If you earn even less, then it’s only a hobby.
- Have the discipline to stick to a commitment.
- Maintain consistent behaviour and apply a winning formula.
Researching Business Industries
- Companies sell research on industry benchmarks.
- Knowing the right information is essential to set your expectations and capitalize on opportunities.
- You also minimize the risk of investing too much time trying to sell.
For more insights about buying or selling your business, connect with David through his website.
- Do you already have a successful business, meaning you're up, running, and paying your bills with some profit left over?
- Are you interested in growing your business, automating/streamlining things, and staying one step ahead of your competition?
- Do you want to achieve your goals, get more things done in less time, and double your sales? Sign up for our 21-Day Double Your Sales Challenge.
📨 If you can answer YES to all three questions, please reach out to me through Facebook: https://www.facebook.com/daryl.urbanski, and describe your situation, goals, and the best time/way to contact you.