This podcast episode is our annual review. Tune in to hear market insights from Andy and Doug as they discuss the competitive nature of the industry, emphasizing the quick turnaround of business engagements at Apex in comparison to the general nine-month to a year market average. They also delve into the impact of past economic events like COVID-19 on business valuations, and how Apex’s focus is shifting towards more recent trends in 2025.
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Back in 2019 someone came into our offices wanting to sell. We did an informal valuation and told him we thought the business could get $575,000 on the market. He demurred, stating he needed $1M. We told him what he needed to do, which included working less in the business and more on the business. If he did, we could attain something closer to that value in a few years.
He kept checking in with us each year, all the while implementing the advice we gave him. We kept giving him better numbers as we observed those changes. Sure enough, four years later, we listed the business for $950,000 (and it sold).
We wish we could say how that always goes, but more often than not what happens is that someone comes in to tell us, “I need to sell now.” We walk through numbers and explain that the business is not ready to sell at the moment, at least not for the desired price, and that some time, from as short as nine months to as long as a few years, will be needed to get the business ready to sell. You being ready to sell doesn’t carry over to the business. The business has to be ready too.
When we tell this to people in this situation, they can get upset. But it’s not personal. In fact, we’d love to take a listing because there’s a chance for us to work and get paid. But we have to turn down far more listings than we accept. Accepting a listing means we believe:
One more thing to keep in mind. What you may be willing to do is not necessarily what a buyer would be willing to do. Consider the seller phrase (which we have heard before), “I make $150k a year and I work 65 hours a week.”
Would a buyer be willing to work 65 hours a week?
Would someone who isn’t a subject matter expert or familiar with the industry be able to get away with only 65 hours a week?
How many ready and willing buyers have on their wish list, “Must work at least 65 hours a week when I buy a business.”?
You may be ready to sell, for various reasons. But make sure you have a business that’s ready to sell. And if it isn’t, have the humility to dig in one last time to get it ready so you can cash out on all your hard work.
Not sure what your business is even worth? Give us a call and let’s figure it out together.
Andy and Doug explore both the desirable and undesirable aspects of seller financing, providing valuable insights into how clean financial practices and market conditions can influence the success of sale transactions.
The episode touches on recent economic conditions, including rising interest rates and shifts in bank lending standards, and how these changes impact the viability of seller financing as a reliable option. Doug discusses scenarios of bad seller financing, marked by overpriced businesses with unverified cash flows, and contrasts them with examples where good seller financing has led to mutual benefits for both parties involved.
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At the very beginning of our process we ask potential buyers to do two things:
While this does not sound like a lot (because it isn’t) it often serves as a significant enough roadblock to keep us from moving forward. Why is that?
One of our brokers shared on a podcast episode that a potential buyer had very quickly signed an NDA, but had refused to disclose any financial information: “My financial information is none of your business, I have enough money to buy this company and I don’t know anything about you.” While that’s certainly true that you may not personally know anyone you share financial information with, it’s context that matters. When you apply for a credit card or a loan, they may not know you personally (and in a certain sense, it doesn’t matter) but they can get an idea about you, at least the part relevant for their decisions, from numbers.
Numbers don’t lie. They aren’t emotional. And for us as brokers, this first hurdle is a bare minimum. Some brokers will require you to disclose all your real estate and security holdings and other such more in-depth information, but for a first conversation about a business, we will need at bare minimum your free cash to invest and your net worth. These numbers verify that you are qualified financially to talk about this opportunity. If this is still really troublesome for someone, we would always happily accept a letter from your banker attesting to your financial capability to execute this deal.
While there’s a minimum of due diligence on our side at this stage in the process, it’s also a question of a level playing field. We can’t just take someone’s word for it: we have to treat every potential buyer equally. If someone thinks he/she deserves special treatment, that’s an early warning to us that this might turn into a very difficult deal.
As we’ve said so often here, confidentiality is key in business transactions. We have a responsibility to the seller to make sure that employees or customers don’t find out that a business is for sale. Key employees may leave and customers, not knowing what might happen, might flee to the competition prematurely.
A buyer is invested in neither of those things happening, so a non-disclosure is the first step in protecting the future worth of a business.
This isn’t something we are opposed to in principle. In some specialized cases or in particular industries a slightly modified version of the very basic NDA we offer might make sense. But more often than not, it’s a red flag of a buyer being managed by an attorney, rather than the other way around.
We can answer a question or two if it’s broad and generic enough. For example, if you are calling about a medical business and you want to know if it has Medicare involved or not (because that’s a dealbreaker for you) we can answer that without making you sign an NDA or share your financial information. Or maybe you want to know if the business is residential vs. commercial, or even how it performed during Covid. A very basic question which for you is a baseline for even looking into a business is totally reasonable. But again, this is not something we run into too often, and it still demonstrates the importance of what we’ve spoken about above.
Promising confidentiality and sharing basic financial information is table stakes for any serious buyer looking to acquire a business. It also serves as a screener for us as brokers. If you make it difficult for us just to get these things done, there’s no way you are going to make it through a months-long process which is going to be far more intense and possibly invasive than these two requirements.
If you’re looking to buy a business, and don’t have any problems signing an NDA or sharing financial information, give us a call.
In this best of episode, we’re joined by Valerie Vaughn to discuss the unique dynamcis of selling a business to a family member.
We delve into the complexities of family dynamics, the challenges of preparing a business for sale, and how the involvement of a dedicated team, including wealth managers, accountants, and attorneys, paved the way for a smooth transition. Valerie shares insights into the strategies employed to double the business’s value over a few years and how these efforts culminated in a successful hands-off transition from parents to son.
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There are many different factors that drive valuation, including things that vary widely, like the status of the market or a given industry. In this article, we will look at six items that don’t vary widely, and matter for every business listed for sale.
The numbers don’t lie. How the business has performed historically and recently matters. In this era, how a given business responded to Covid and the lockdowns is particularly relevant.
Don’t: make unnecessary capital expenditures to “save on taxes” at the end of the fiscal year. You’ll create a narrative that includes lower net income (which leads to a lower valuation) and burden yourself with assets that may not be relevant or necessary.
You don’t need to be number one in your market to have a sellable business. But you do need to either hold your position well or be closing in on who is ahead.
You also need to have a good reputation with vendors and clients. That goodwill is something that the buyer is banking on and that you’ll need to deliver to sell your business.
Do: know your competition and their strengths and weaknesses and see if you can adapt your company’s approach to gain ground on them (or put them even further in the rearview mirror).
Part of what you’re selling in a business is the daily, monthly, quarterly, and annual processes. These processes must be written down somewhere and have a method of being updated and improved. Without a manual for running the business, a buyer can’t be confident in taking over from the seller.
Do: document everything you do and how you do it. If you feel burdened by having to write everything, consider a video alternative like Loom.
There will always be employees who decide that the sale of a business also marks the end of their time there, for whatever reason. Since confidentiality is a must of successful business sales, you’ll need to have done your best to assess who are your best and most necessary team members and the likelihood of their staying, along with contingencies. No business should be hostage to any single employee.
Do: have backup plans in place for every key employee who could leave in a sale so that a buyer can be more assured regarding this issue.
One of the first places a savvy buyer will look is for opportunities to grow that the seller has neglected. That could be better strategies for SEO or a slicker website, or it could be expanding sales into a different category that the seller didn’t pursue for whatever reason.
That same profile of buyers will be looking at exposure. Today, one of the worries for buyers and sellers is the role of AI.
Do: Have answers to how AI will affect every part of your business.
Sellers love barriers to entry because it makes it harder for new competition to enter the fray. Buyers love those same barriers because it makes them feel like their investment is that much safer.
Not every business is built for IP in the product or service itself (think Post-It notes). If you’re not in that type of business, you can create moats and barriers in various systems within your business. Perhaps you develop a proprietary way of sourcing leads, or a leaner system of operations.
Do: Consider creating systems or processes that your competitors can’t duplicate.
Do we have your mind working on ways you can improve your business as you work towards a valuation and a possible sale? Good. Now, give us a call so we can brainstorm together.
In this episode of the Apex Business Advisors podcast, Andy and Doug dive into the world of fad businesses, featuring an engaging discussion on Rage Rooms. They explore the initial excitement around these trendy ventures like axe throwing, wine and paint experiences, and escape rooms, questioning their long-term viability in the ever-evolving market.
The hosts also reflect on their experiences with other fad businesses, like Andy’s former smoothie and supplement shop and the rapid rise and fall of boxing franchises. They emphasize the importance of evaluating a business’s longevity and the role of personalities in driving success, offering valuable insights for prospective buyers and sellers. Don’t miss this deep dive into understanding what makes or breaks a fad business!
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Websites like BizBuySell have made it easier than ever to look for businesses to buy, but they don’t necessarily make the buying process itself any easier. In fact, it can frustrate some buyers.
In fact, it’s often after getting the run-around with some listings on public websites that serious buyers come to us looking for help. We can help put together opportunities that match a buyer’s specific needs and wants.
The most popular factors for buyers include:
Part of what brings a client to us for our buyer search service is frustration. The client may have already had a couple possible deals fall through for any number of reasons. We have to communicate at the outset that that may happen again.
There is no “drive thru” service for acquiring a business. As much as we would like to offer that, it’s just not how things work. When asked about how long the process might take, Debbie Small shared that she thought most of her buyer searches averaged around 150 hours on her end, and that her buyers know she suggests it’s probably going to be the same amount of time on their end as well.
As we always say, it’s a marathon, so have the mindset that patience and diligence wins here, even though you may run into frustrating situations. Buyers have to be committed to the process once they get started.
We referred to 150 hours of work during this process. What can this include?
The buyer will also need to do the regular due diligence and legal consultation that’s part of any business transaction.
Apart from the mindset and the work a buyer will need to put in, we have to know that their personal life is in order and oriented towards this goal. We’ve shared in a previous article that a spouse threatened a divorce if a business was purchased. This is an example of a complete absence of integrating one’s personal life into this process. If your family isn’t on board with this, they either have to get on board or you have to abandon the process. Sometimes, the family has fears and problems we can help overcome, and sometimes we can’t. Either way, we can’t help what we don’t know about, so let us know about any challenges that might not be immediately obvious.
Tired of running into unserious listings on business sale websites? We have access to many businesses that are never going to show up there but might be perfect fits for you. Contact us today.
In this best of episode we discuss the standards expectations of a seller with our friend and colleague, Chuck Campbell.
Chuck shares insights into the importance of understanding a business deeply before agreeing to sell it, emphasizing the need for realistic valuations and marketability. He elaborates on the four crucial metrics that define a suitable seller and a trustworthy, communicative relationship. Real-life examples bring these points to life, including challenging scenarios and lessons learned the hard way.
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