HireMyVA Podcast

HireMyVA Podcast 144- Why Should I Sell My Business Pt. 3

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Episode Summary

This is the third part in our selling your business series.

The first one was about the whys, why do I want to sell my business? We talked about that you may not want to do your business anymore, and rest assured, that day will come. You’ll either want to or have to for various reasons such as physically you can’t do it anymore. Or maybe you want to simply get rewarded for all of your hard work. Go back to episode 142 for the details.

The second part, episode 143, was about how to position my business for sale. We discussed having proper systems, which systems, maintaining a client database, having recurring revenue, and some other things.

In this episode we’ll talk about the actual HOW. Of course, this is assuming you’ve got your Why down and begun preparing your business for that.

RESOURCES
========================
HireMyVA Podcast 142- Why Should I Sell My Business Pt. 1 - https://youtu.be/vlK2sz8PUVo
HireMyVA Podcast 143- Why Should I Sell My Business Pt. 2
https://youtu.be/gWGKIW0X_hY

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Looking for a business mentor that will surely propel you to success? Check out Larry's site.
https://larrybroughton.me

Learn more about Larry Broughton
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Website: https://larrybroughton.me
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Learn more about Dave Braun
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LinkedIn: https://bit.ly/3EpvoQe

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#SellingYourBusiness

Episode Transcription

Dave Braun
00:00:00
Hello everybody welcome to the HireMyVA team and Business Building Podcast brought to you by Yoogozi.com. And in this podcast and HireMyVA, we help you to reclaim your freedom through hiring and thriving with Virtual Assistants without breaking the bank, and of course, that is your bank, the most important bank. And I’m Dave Braun and I’m here with my good buddy, Larry Broughton. Welcome, Larry to another episode that we’re gonna be recording, thanks for being my friend and my business partner, and just let everybody know what the heck is going on, man?

Larry Broughton
00:00:34
Hello, handsome David. How are you, my friend?

Dave Braun
00:00:37
Great, man. You’ve had a lot of stuff happening lately, right?

Larry Broughton
00:00:41
Been a very busy day, been a busy life, but what the heck? It’s a great life if you don’t weaken. You’re the friend who tells me that all the time.

Dave Braun
00:00:49
Well, it’s and it’s great to be busy. We want to be busy. T

Larry Broughton
00:00:53
It’s better than the alternative, given today’s market conditions, right?

Dave Braun
00:00:57
Yeah. We got an upcoming episode. We’re gonna talk about that stuff too. A little bit, huh? Oh yeah.

Larry Broughton
00:01:04
Yeah. oh, you’re such a tease. Okay, all good. But I think today is a continuation

Dave Braun
00:01:09
It is!

Larry Broughton
00:01:10
Part? I forget what part we’re on, on this .

Dave Braun
00:01:13
Number three, I think. Okay, so this is gonna be, this is episode 1 44. And the question to continue this saga, I guess?

Larry Broughton
00:01:26
It could feel like a saga for sure. Yes.

Dave Braun
00:01:28
Is, is How Do I Sell My Business? We’ve been talking about selling your business, you know, about the WHYs. Like why do I wanna do it? Sure. You know, and, and the, you know, I think a couple of episodes ago we talked about, you may not wanna do your business anymore or, you know, guess what? You will not wanna do your business for some reason or another some point. You know, and then we talked about the next part, which was 1 43. So the first one was 1 42 about the wise 1 43 was about how to position your business for sale. What are the things you need to do, get ready to sell? You know, we talked about maintaining client database about getting your recurring revenue up, like systems, you gotta put together a few other things. So that was episode 1 43. So today though is kind of the, what would you say? Like the, the peak of the three, we we’ve kind of set this up. So this is probably the most important we want you to listen to the other ones, of course, but this is one of the most important ones, important episodes that we’ve actually recorded and obviously the most important in our three part saga. So we’re gonna talk about HOW.

Larry Broughton
00:02:45
On a sec. Yeah. Larry, I think Dave, to expand on your background a little bit more, the Genesis of this conversation was a question that was submitted. That was kind of on the heels of a conversation you and I had had after reading an article and talking to a friend of mine, who’s been a business broker for, you know, 30 plus years. And the realization is that many businesses never sell.

Larry Broughton
00:03:12
The entrepreneur just closes or the business owner just closes up shop. Yeah. You know, they might be the plumber or the carpenter, or they might be the dry cleaner or the catering business, whatever it is. And they just don’t have the awareness, perhaps it is? the inclination or have not taken the time to prepare, to actually sell. They think, well, what who’s gonna buy it. Right. And it could be a competitor could buy, it could be a young entrepreneur. There’s a lot of reasons, but I would encourage you go back and listen to those first two parts of this. But you know, as always, Dave, I always remind you and folks that behind every question is another question is what an attorney friend of mine used to say. So how do you prepare to sell? Or how do you sell this? Well, first thing I think you need to ask is, are you really ready to sell?

Dave Braun
00:04:03
Mm yeah.

Larry Broughton
00:04:04
That we have to get real crystal clear on, are you really, and I mean, really ready to sell and what I always try to encourage myself to do and encourage our clients to do is when there’s a big decision that needs to be made, you pretend that you’ve already made that decision. Make the decision in your mind and then live with that for a day a week, whatever it is. All right. And then go back and say, that really wasn’t the right decision. Now let me live with the alternative. I’m not gonna sell all, whatever it is, play both of those and let that sit with you for a while.

Dave Braun
00:04:43
Yeah. Yeah.

Larry Broughton
00:04:45
But you have to really be ready. I’ve seen way. I don’t, I don’t say too many times, but I’ve seen often where with either businesses that I’ve been a partner in particularly a minority partner in, or I’ve been an operator because one of the businesses I have is somebody might own the business, but then we operate the business and we just determine, Hey, let’s take this thing to market. Let’s bring in the buyers, let’s do that whole thing. And then all of a sudden, the owner decides, oh, I’m too emotionally detached to it, they can’t separate. What are we gonna do with our team members, for instance? Or so then now all of a sudden they start to put these weird contingencies on the sale. Like I have to be involved. You have to consult with me on things. It like no one’s ever gonna do that. Yeah. So you really have to be ready for this?

Dave Braun
00:05:38
Yeah. I can. I can see your, I can see maybe a family member coming outta the woodwork. Well, really you’re gonna sell well, I wanted to, you know, buy it. Yeah.

Larry Broughton
00:05:46
I want to close it. Exactly! So what I would say maybe step number one, then once you’ve really determined that you are ready is you need to prepare for the inevitable, which is to answer the question. Why, why are you selling? Cause I guarantee you, whether you’re using a broker or you’re just putting a for sale sign out in front of your store or business, ultimately that question is gonna come up.

Dave Braun
00:06:17
Yes.

Larry Broughton
00:06:17
And there’s nothing wrong with that, but you do need to prepare a clear and concise explanation about it. And there’s no really wrong answer where it’s wrong is when you start offering sketchy reasons that aren’t true because you’re gonna, people’s radar are gonna pop up. And if they’re a savvy buyer, they’re gonna be looking for reasons not to buy. Okay. Yeah. I like, so you, so whether you’re selling because you’re moving out of state, you’re now an empty nester, boredom, burn, bored burnout, partnership disputes- those are all valid reasons that a sophisticated buyer or investors gonna say, okay, well that makes sense. Cuz many of us have had all of those types of things. But it needs to be a clear, concise thing and not some kind of tap dance. So I would make sure that you’ve got a clear and concise explanation of why it is that you’re selling.

Dave Braun
00:07:17
Yeah. And I liked your analogy when we were talking about this before starting the recording about, you know, selling a house now selling a business of course is a lot more complicated and there’s more to it. But selling a house is kind of a good analogy. If you’re gonna sell your house, it would be nice to communicate to your real estate broker, why you are selling. In other words, you’re selling because you are moving to a bigger house or you’re downsizing or something like that, as opposed to moving because the next door neighbor, you know, turns out was a serial killer that just got out jail.

Larry Broughton
00:07:54
So they got a meth lab next door.

Larry Broughton
00:07:58
I think, and under this analogy though, I think you’re right. There are some corollary things between selling a house that not whereas a house, most people are like, okay, do I like this? There’s usually not a sense of suspicion when somebody’s going to buy a house. There’s not a level of suspicion, right? Because this is where they’re gonna be. It’s how do they feel emotionally in the place and usually there’s only a few reasons why someone would sell a house, but a business because it’s an investment and you’re gonna be expecting to get something in return from it, besides a roof over your head, there are all kinds of shady reasons why we’re looking for, is it a potential investor on why you really selling this thing? Like, are your financials really accurate? And we’re gonna, we can talk about that here in, in a couple of minutes. Okay. But I’m, I’m glad that’s a good corollary. Cause because most people have at least been involved, peripherally on buying or selling a home.

Dave Braun
00:08:56
Yeah. Well, and I think the next point when we were talking about this ahead of time, that’s important was realize that this is not gonna be an overnight process. So for example, we were talking about selling your house typically and normal markets. It takes a while lately though, it’s been like a few days, that’s just not gonna happen with your business. In your experience and what you’ve seen. I mean, it’s like years, I know we have one, one client who has been trying to sell his business for five or six years.

Larry Broughton
00:09:31
Yeah.

Dave Braun
00:09:31
Just hasn’t found the right buyer.

Larry Broughton
00:09:32
It depends on how specialize. It just hasn’t. How specialized is it and what are your non-negotiable terms and contingencies. So it could take six months or it could take a couple of years to actually sell. I would encourage folks again on this mindset thing, you know, you and I talk about this all the time with our mastermind clients is when you’re starting your business begin with the end in mind, you should understand at what point are you going to be selling this thing? So, but let’s say you didn’t, let’s say that you have not had the privilege to work with Dave and Larry and all the systems are in place, but you stumble on this recording this podcast, this video, and you say, well, maybe I should sell it. Instead of just winding the thing down, we go into detail in the previous episodes of this three part series or four part series, whatever it is.

Larry Broughton
01:10:24
And we go into some, some detail on that, but let’s say that you decide, okay, I do wanna sell it. And if you have not put any preparation into it, it’s gonna take you a while. You’re gonna wanna make sure that your financials are in order. You’re gonna wanna make sure that you’ve got some nice trending profitability or increase in market share. You’re gonna make sure that you’ve got good inventory control, good processes, negotiate good terms on any of the services that you use. If you are in a least space, you need to ask yourself, does it make more sense for me to negotiate an extension on the lease so that I have more value in the business because a lease can be an asset, right? If it’s a crappy lease, it can be a liability. But you know, you gotta look at it, make some considerations with that.

Larry Broughton
01:11:14
You’re gonna want to take some time to prepare what’s called a data room. Which is basically a, some kind of electronic vault where you keep confidential information like financials, like inventory, like any kind of lease agreements that you you’ve got, any kind of partnership agreements that you have that are gonna impact the valuation of the business. So you’re gonna wanna prepare that. And none of that’s gonna happen like you say, Dave overnight, it’s gonna take some time to do it. And frankly, let’s say that mystically magically, the reason that’s what, what has triggered this is someone may have come to you and said, Hey, I do wanna buy your business. All that, when they start going through the what’s called the due diligence process of capturing information, that information that they gather, you need to be putting into that data room. So that cause that most likely that first buyer, that deal is based on odds, It’s not gonna go through. It’s kind of rare that you get somebody who says I wanna buy your business and that deal goes through. Yeah. Usually it takes a couple of times to do this. So all that takes time. So if you got like a hard press date, I’ve gotta be out of the country by this date. You gotta have wiggle room in there. So just plan, this could take six months. It could take, like you said, could take a few years.

Dave Braun
01:12:43
Yeah. Yeah. I may have told a story in a couple of other episodes, one of the other episodes, but former a mechanic that we had. Yeah. They were great honest husband and wife ran it. They had some guys work for ’em and it was, I mean, they had a pretty good operation. And then one day, his wife who ran the books in the customer service and a lot of that, she ended up having some mental health issues like dementia and all that and so he wasn’t ready to sell obviously, but I think the lesson for us is when we think about the time it’s gonna take to get yourself ready to sell it the time it’s gonna take to find a buyer, make sure that you have some trigger points in your life to think what are some of these trigger points that may cause me to make that decision to actually sell. So in his case, it would’ve been perfect to say, well, my wife is on a little bit of a decline here. I know that in a year or two years or two and a half, three, that I’ll probably be taking care of her full time. I better start thinking about getting this business ready to sell now.

Larry Broughton
01:14:03
Yeah. I like that. And I think that, you know, if you wanna be really proactive and be intentional, like when we talked about, I think it might have been the first point that we formal point that we made about begin with the end in mind. Yeah. That might be time to put some of these triggers together, you know? When I’m an empty nester, if me or my spouse, you know, have some kind of that’s taken up whatever it is. That’s, that is a good reason. The folks that I’ve seen, who have made out best in business are those folks who are always prepared to receive a sale, to receive an offer. Right. You know, when you hear some of these old timer guys like you and me now, you know, the gray-haired guys, somebody says, Hey, is it for sale? You say always for sale.

Larry Broughton
01:14:54
And done the right price. Anything’s for sale. We’re ready. And then that way you can take the opportunity, take advantage of the opportunity that comes along. But all this, as you were saying, it takes time, you know? Yeah. There’s a process here. And if you’re not ready, if you don’t have a coach or a mentor in your, your life, I’m glad that you’re watching this video by the way, because you’re doing what I’m about to recommend that’s to educate yourself on the process. You know, this isn’t something that you can delegate, hand over to someone else and say, Hey, I’m gonna sell my business, go do that for me. But part of that legwork, you do, and this is why you pay a broker. But a broker is still gonna come back to you and say, and ask a million questions like that.

Larry Broughton
01:15:40
We’re going through today. They’re gonna wanna see financial. They’re gonna wanna see marketing plans. They’re gonna wanna see tax returns. They’re gonna see all kinds of stuff. If it’s real estate or there’s a actual deed of sale, that’s gonna go with this. You know, there’s all kind of legal docs. You have to be involved as the owner. Generally I say in business, there’s two things. You shouldn’t take your finger off the pulse on. One is the marketing of your business. And the other thing is your, the purse strings of, of your business, right? This would come under the purse strings portion, right? You need to keep your finger. You need to be intimately involved in the preparation and sale of your business. That doesn’t mean that you’re the one who’s show. You know, if it’s, you got a broker, you’re not the one maybe doing tours of the property or going through all of it, but you need to be intimately involved in the preparation of the sale.

Dave Braun
01:16:33
Yeah. And as far as there’s a, there’s another thing that we had talked about ahead of time that, ideally you’d wanna find a buyer, you know, as you, as folks come, you gotta do your due diligence on the diligence on the buyers. But as they come, ideally, you wanna find somebody that will take care of your clients that will serve your clients. Well, especially if you have, what we’ve recommended is you have some recurring revenue. So chances are they’re with you for a particular reason, they’re paying you money on a monthly basis, yearly basis or whatever. You’re providing a certain level of service. And most likely they’re depending upon that to run their business. And that may or may not easily be taken over by somebody else. So if you sell your business to somebody who doesn’t care about your clients, or they wanna merge it with something else, your clients are gonna be scrambling now. And you pointed out when we were talking about this, Larry that’s ideally, right? Sure. I mean, it’s your business. You do what you want, but it would be nice if you have a choice, choose somebody that will take care of your clients. It’s a nice thing.

Larry Broughton
01:17:44
That’s ideally, this is why I started out with the, the whole thing is you need to be emotionally, are you ready for this? Yeah.

Larry Broughton
01:17:52
Cause to me, ideally is I don’t care. I gotta be at that point where if I sell this business, it’s up to them. What they do from then on, because yes. Is it nice that your clients are taken care of? Yes. It’s nice that they’re taken care of, but do you have a moral responsibility to these clients? Cause it is business. It is after all it is, you know, you don’t have a moral responsibility. Once you have sold your business, it’s up to the new owner of that business. And you hope that they’ve got the same level of morals and standards that you do, but it’s not you no longer have that moral, you know what bond yeah. To your clients. And they’ll know pretty quickly. And you’re probably not the only person who can service them. Y

Dave Braun
01:18:42
They’re, they’ll be able to find somebody. It will be, you know, a little bit of a hassle form, but they’ll be able to find another provider.

Larry Broughton
01:18:48
Yeah, they will. Yeah. Now here’s something Dave, once you’ve made a bunch of these determinations, you’re not likely, maybe this can kind of tie into, try a couple of men here too, is you gotta figure out, okay, what’s the valuation of my business. If I’m gonna sell my business, how do I know what I sell it for? Right. And there are lots of rules of thumb. You know, some are on a cap rate, some are based on percent multipliers of gross revenue. You need to go look at your industry. You can just do a quick internet search and say, how do I value my blank business? But this is why a lot of the, there are brokers and most industries or brokers, we specialize on specific industries and they can give you a rough back of the envelope, valuation of your business.

Larry Broughton
01:19:41
Now keep in mind, brokers are like anybody else, they may give you pine the sky valuations. This is secure this agreement, right? Yeah. So they may say, Hey, I think that your business is worth blank, knowing that all the offers are gonna come in at 25% below what his or her magic number was, but in their mind, well, at least I secured the listing and then I can just tell the seller, well, this is what the market is bearing right now, you know, he’s gotta be aware of, of, of this. Right?

Larry Broughton
02:20:20
If you get a formal appraisal, if you’ve got an appraisal, then in some states, you have to actually share what that appraisal was. Now, if you’re gonna be putting financing on, if the potential buyers gonna be putting financing on it, most banks are gonna require an appraisal of that business. You’re gonna be putting any kind of financing on it. You know, particularly if it’s like, it’s gonna be highly leveraged. They’re gonna want that. I had the idea of getting a broker, but that is kind of this, this next one is you need to ask yourself, do I wanna sell this myself, which is basically going out in front of your house and pounding a handwritten for sale signvinto the ground and expecting people to come. You can do that. And there are some online business sales websites out there like Bizbuysell, you know, or LoopNet, those types of things nowadays that you can use. Or do you actually go to a broker? Now the good thing about a broker Dave is that their whole business is built on contacts.

Larry Broughton
02:21:29
Okay. Of people who will be buying your type of business, one of the businesses I’m in is hotels, right? And so I’m not gonna hire a re a residential hotel broker to sell my hotel. I’m gonna go to a hotel broker who has a whole laundry list of hotel buyers that he, or she’s gonna bring to me. So that’s what a business broker will be able to do. And it’s like in a residential broker, they will separate the process. They’ll work with the attorneys, they’ll work with you. The seller they’ll work with the buyer to make sure that all the things that need to get done, get done.

Dave Braun
02:22:10
Yeah, yeah.

Larry Broughton
02:22:11
You know? Well,

Dave Braun
02:22:13
So then yeah, just, yeah, like a real estate, you can sell your house yourself or find a real estate agent and one’s more of a household than the other. So you just have to determine that, but let’s assume Larry that, you know, for most folks they’ll want to they’ll wanna get a business broker.

Larry Broughton
02:22:32
Yeah. And you can talk to other folks that you know, who sold their business before and ask for referrals. Hey, who, who did you use? Yeah. You can certainly do internet searches, you know, for brokers who specialize and you can talk to your business coach or mentor, they can help you through the process and helping out one of our clients right now, as they try to, they’re preparing for the time to sell their business. And so I took them through a process where all of a sudden they’re looking, they’re looking completely differently at the valuation of their business. Now that we did a competitive set analysis on other businesses like theirs, that’s selling in the marketplace, right? So a coach or a broker will help you with this process, but just start asking around, use your network and just keep in mind that like a residential broker, a broker’s gonna be expecting some kind of commission upon the sale. Don’t hire somebody who’s gonna sell it on retainer. I’ve seen some of those clowns, you know, they wanna take a retainer up front and then they wanna success fee. Don’t do that. Don’t do that. Just, just like a residential broker. You’re gonna pay them a percentage of the sale. And it could be a couple points depending on the size of the transaction. A few points down to a couple of points.

Dave Braun
02:23:54
Yeah. And one thing I think to realize about any kind of a broker is normally like, they’re gonna get a percentage of the sale, but they’re gonna want to likely sell a lot quicker than maybe you want to, because if you wanna hold out for a little bit more, they’re like, no, I don’t wanna do that because the, that little bit more that you get looks good to you, but a small percentage of that ends up being a very tiny amount of money. And they’d be like, it’s just not worth my time. Let’s sell this thing and move on. And I’m gonna go onto the next business.

Larry Broughton
02:24:30
Just do your homework with these folks, interview broker, just like you would anybody else, you know, you’re gonna ask for references. You’re gonna to those folks business they’ve sold in the past. You know, again, this is not, I, I get that. There’s a lot of moving parts on this and this is why a lot of people just, I don’t even want to do this and they just close the thing down, but you could be leaving a lot of money on the table by just closing the damn thing down

Dave Braun
02:24:58
AB absolutely. You know, one of the things that you talked about is I think it would be a really good idea for folks to have somebody that can advise them a coach, a mentor has a little bit of experience in that that doesn’t have any financial stake in what you’re doing. Yeah. That’s so they can give you, you know, the honest truth, like what you did with the one particular client. Yeah. Tell ’em to go back and do certain things ahead of time.

Larry Broughton
02:25:24
Yeah. Yeah. I think that’s, that’s always wise.

Dave Braun
02:25:26
So it’s always wise to make sure that you have an independent coach or mentor through this. And even, even folks, even as a business owner, you’re not gonna sell right now. You should have a coach or mentor.

Larry Broughton
02:25:36
Yeah. Yeah. For sure. You know, Dave, I’m gonna just share kind of a lesson here that I see a lot of businesses do once they make the decision that they’re gonna sell and we’re gonna beg you don’t do this. Don’t stop investing in your business and just say, Hey, it’s for sale and let things decline.

Dave Braun
02:25:53
Oh yeah.

Larry Broughton
02:25:54
It happens way too often. You know, you start detaching emotionally from it. The problem with that is people don’t generally want to buy a business that’s on the way down. And if all of a sudden they start seeing declining Yelp reviews, declining, you know, all of a sudden, a bunch of team members leaving your business, looking for greener pasture somewhere else. Those generally aren’t good signs. And so you have to dig deep and continue to invest emotionally and financially into your business.

Dave Braun
02:26:33
Yeah.

Larry Broughton
02:26:35
Most buyers are looking for what we call low hanging fruit, you know, which generally not looking for business. That’s totally peaked. You know, like there’s not another dollar that we can get out of this thing. We, or we’ve gained all the market share that we can. But we would rather see it buy a business. That’s going like this than going like this. But emotionally you can get there. I mean, I’ve just seen it when we’ve gone into buy businesses or buy hotels, you can tell when the seller is done, they just want out. Now, if you’re more of a Hawk, like I am, when it comes to these things, you look at that as an opportunity. Yep. You know, but you need to be ready for a buyer. If you’re the buyer going in saying, okay, I get that. It’s going down like this. And that’s an opportunity for me to turn this thing around.

Dave Braun
02:27:22
And

Larry Broughton
02:27:22
That’s reason the reason I’m encouraging you and you, and I’ve talked about this with our clients before is to continue to keep your pedal, your foot on the pedal and leaning into your business is because that buyer may never come. Yeah. Or not come when you want to come.

Dave Braun
02:27:37
That’s Right.

Larry Broughton
02:27:37
Right. And so you need to keep acting as if you own this thing and I’m gonna own it for a while.

Dave Braun
02:27:44
Yeah. And that’s why we talked about having a few trigger points that get you to where you are thinking, okay. I better really start thinking about selling my business. Like right now, I better do it in the next year or two. Because if you wait till the last moment, like you said, you’re emotionally checked out. You’re gonna get a fraction of what you want reminds me of, if you’ve, if you’ve had construction going on in your house, typically you do a remodel and you think it’s gonna take three months or it always ends up taking like twice as long,

Larry Broughton
02:28:15
Twice as long or twice as much. That’s the rule of thumb.

Dave Braun
02:28:18
Yeah. Twice long and twice as much. And guess what happens at the twice as long period, you’re like, I don’t care about that little hole in the wall. Just get out. I’m done. I can live with it. Well, you’re emotionally done. The same exact frame of mind can happen when you’re talking about selling your business. Yeah. Yeah. Let’s avoid that.

Larry Broughton
02:28:37
Let’s yes. Let’s avoid that.

Dave Braun
02:28:39
Yeah.

Larry Broughton
02:28:39
Let’s avoid that. Let’s assume that things have gone well. Yeah. And you’ve done all the stuff that we’ve talked about so far, you know, and your broker’s doing a great job and all of a sudden you’ve got some, some, not one, some perspective buyers here. So now what do we do, Dave? You know?

Dave Braun
02:28:59
Yeah.

Larry Broughton
02:28:59
Well, I think again, make the correlation, like if you’ve got, you’re selling a house. I remember sold the house in San Francisco when I was married and, and it was back then it was, we sold like it right near the peak of the housing market. And we had, without exaggeration, you can talk to my former spouse, Dave, and she’ll verify this, the broker had 300 flyers to hand out that first day and they were gone halfway through the open house.

Dave Braun
02:29:30
Oh

Larry Broughton
02:29:31
Yeah. We had several hundred people come through the house the first day. Wouldn’t that be awesome. So that made pretty easy because I think that was on a, I don’t know, a Saturday maybe, or a Sunday, I forget what it was, but whatever the next day was that we were gonna actually meet with the, our broker. He had like a dozen offers on the thing. And so I just went in and said, so he started like at the bottom, I knew what he was doing, you know? Well, here’s an offer at blank dollars. And I said, I don’t even need to, we’re gonna start at asking, what did you know, what was our, anything over price? That’s all I wanna look at. Don’t you don’t need to string me along. Right? Yeah. So we looked at first, we looked at what are our offers at asking price?

Larry Broughton
03:30:20
What are they over price? What are gonna be all cash, which have no contingencies. So you wanna, that’s kind of the ideal situation where you wanna be, right. Who’s gonna do the quickest close or the longest, whatever it was that worked with our schedule. But we were looking for a quick close. And so that was very nice because there was gonna be all cash, no contingencies buying as is. It’s like, give us the check and we’re gone. So try to get a couple of buyers if possible. That’s kind of an ideal situation. The worst thing you can do though, and frankly, I’m working I got a deal right now that our VP of business development I are working on, we’re not buying the hotel asset, but we’re shepherding the process. And the seller is going dark with the buyer. What do I mean by going dark, not communicating the buyer’s like, got the check, you know, got proof of funds, but the sellers stop communicating.

Larry Broughton
03:31:21
You can’t do that because then you start scaring the buyer. And then the buyers, they usually, they, their money is what’s called impatient. It’s gotta get placed. Other times they’re pulling that from another investment. And if you go dark, you stop communicating with the buyers, they could leave you. Right. Yeah. And then when future buyers come to look and they keep saying, well, this thing keeps going in and out of escrow, that scares them as well. Yeah. So you’re gonna keep this in mind. And ideally I think I keep using this word ideally, because I think that’s what we’re shooting for, right. Is to only look at buyers who are pre-qualified can pretty quickly prove that they’ve got financing and the ability to provide the equity. Those are couple of things that you really want because you don’t want the, the tire kickers, I guess. Yeah, for sure. And as you’re going through the process, Dave, of determining, am I gonna sell? You can ask yourself too, am I willing to finance part of this myself? Mm. Yeah. Like when we’re buying or selling businesses, I always talk about, you know, you really have price and terms. Those are the really two most important parts of, of a sale. Right?

Larry Broughton
03:32:40
And so price and terms now financing is one of those things you need to actually consider because you could make more money if you’re willing to take the risk. When I say carry paper, do you know what I’m talking about, Dave? Or some of our, you, you do, but I’m sure some of our listeners don’t, I’m talking about where you’re actually providing some of the debt. So let’s just say you wanna sell your business for a hundred thousand dollars. Right. And you understand that your potential buyers probably don’t have a hundred thousand dollars. And so what you’re looking for is you’ll take $50,000 in cash and you will finance the other 50,000 for them. Now you’re not just gonna finance it at $50,000. You’re gonna actually charge an interest rate right. On that additional $50,000. Right. So you could actually end up making more than a hundred thousand dollars, but it’s the time value of money.

Larry Broughton
03:33:29
I don’t wanna get too wonkish for people. But they have to pay for the privilege of you carrying paper for them, right. And so you need to make a determination. Are you willing to do that? Now, some people are willing to do that, but it’s a risk. You and I both know someone and we were on the phone with her recently where she carried, it’s a big mistake and she knows it now. And she’s mentioned it publicly. She carried, I think almost a hundred percent of the sales price. So basically she was letting the buyer come in and make payments for her. What’s the downside of that. If they run the business into the ground.

Dave Braun
03:34:15
That’s right.

Larry Broughton
03:34:16
They lose all the clients. They don’t know what they’re doing. You could lose everything. The good news in this, particularly if you have a physical asset, not a service based business, is that part of your loan documents could require that they spend X number of dollars per year on the physical plant of the business to keep it up to certain standards. So in the unlikely event that they default, you still get a quality product back, but that means you need to then step back in. And go through the whole process all over again, to find another buyer.

Dave Braun
03:34:53
Yeah.

Larry Broughton
03:34:54
Okay. So it’s just something to make sure that you consider.

Dave Braun
03:34:59
Yeah. You’d have to be willing to step back in if things, you know, like you said, got to where things were declining, you’d have to step back in and rescue it. And I don’t know, you just have to think about that ahead of time. Right. I think you also have to think about as part of the deal, there may be some folks buying it that said, well, you know, I wanna buy it, but I don’t have any time to work in the business. Can you do this for the next three months, six months, can you help us bridge? And you have to be willing to do that, supposedly.

Larry Broughton
03:35:31
Yeah. Yeah. That’s supposedly. Yeah.

Dave Braun
03:35:34
Yeah. I mean, it’s your terms, you’re selling your business, you’re selling it, but it’s good to think about it ahead of time, because it may open you up to getting a higher price. If somebody comes in and says, well, I need your help for the next six months and I’ll pay you a certain salary. Yeah. They may, they may be a better buyer for you. Yeah. May give you more money in the long term. So you just have to be ready for that.

Larry Broughton
03:35:53
We haven’t mentioned this and we would be absolutely remiss if we didn’t, you need to do two other things as well, make sure that you’ve got an attorney on board. To help you through this process. Right. You should not be doing any of these agreements cause you’re gonna need bills of sale and you’re gonna need all kinds of legal stuff taken care of. And of course, you’re gonna have to pay that, you know, out of the sale on this and I’d be talking to your CPA or your tax planner prior to, to this as well.. So I’d make sure that that’s going on. So let’s assume again, we’re going back to the ideal. Ideally, you’ve got multiple potential buyers on here. I like to price businesses when we sell them with some room to negotiate. Now you’re always hoping that you’re gonna sell in a hot market. Right. You put the business on the market for 10 million and you hope that people come in and they bid it up to 12 million. That’s the hope. Right. But oftentimes you put it on the market for 10 million and people are gonna come in, and offer you less than that. Cause I can tell you most, I don’t think I’m a unique buyer or business investor. My theory is always, you make offers that are marginally offensive.

Dave Braun
03:37:04
Right.

Larry Broughton
03:37:04
You offer it’s like, you don’t wanna make an offer where they don’t even return your call, you know? Yeah. But you wanna make an offer that like, are you serious? But well, let me see if they’ll move. Okay. See if they’ll move up. Okay. So that’s what you need to expect. So put it on the market for 10 million, expect that you’re gonna get some offers unless it’s a super hot market. They’re gonna come in less than that. So you wanna price it, knowing that if you absolutely need to make 10 million, I would not be putting on the market for 10 million. You know, you gotta talk to your broker. Of course, because sometimes they know that it’s gonna, the bid process is gonna bump it up, you know, but I’d be putting on the market for more knowing that I’m probably gonna have to negotiate down a little bit.

Larry Broughton
03:37:55
You want everybody to feel good at the end of the day that they got, they came out of this, you know, with, with a good deal. But again, if you go back to the point that I’d mentioned just a second ago, making sure that you’ve got an attorney to, to do this, they they’ll help separate the pro the process as with your broker about getting it into escrow, making sure that all the, everything that needs to be signed with your bill of sale, your assignments of leases and the assignment of all your agreements, all that gets taken care of. Yeah. During that escrow process.

Dave Braun
03:38:31
Well, and, and Larry, one of the things that you were talking about too, is be careful of when you give out the information on your business, the details. So like if you’re selling your house at some point when you’ve got either in escrow or you got a couple of buyers or whatever, then at that point is when you give away, like you have to declare certain, you may have a home inspector come and declare about termites and all that kind of stuff. So at some point you’re gonna have to show, you know, all your financials to some yeah.

Larry Broughton
03:39:06
Right. That’s a great reminder, Dave. Thank you. So in your purchase sale agreement, I mean, you’re gonna wanna make sure that you’ve got non typical. Here’s typically what happens for someone to even get access to your data room, remember the data room is where you’ve got all your information. They have to sign a confidentiality non-disclosure agreement that they’re not gonna take this information to share it with the world. So you wanna really make sure that that is signed. Okay. Yeah. Upon that initial review, that’s what they’re gonna come up with and maybe do a walkthrough or an inspection. Then they’re gonna craft the purchase sale agreement, but you’re right. You wanna have a document signed non-disclosure and confidentiality agreement or they’re not sharing the stuff for the world. Now what you may wanna expect, Dave, like for instance, you know, we were talking recently about, oh, I’m gonna go there. Let me rephrase this. What you may wanna consider doing is, or expect anyway, a buyer may ask you to sign a non-compete agreement.

Larry Broughton
04:40:11
So it’s a non-compete agreement. It means that you’re not gonna open up the same business across the street for some period of time. You know what I mean? Right. Because I say that you do have a good relationship with all, all your clients and buyer buys your business for a million dollars. You collect that million dollars. You open up same business across the street and all of your former clients that you’ve worked with for 25 years, just go across the street. That’s not fair either. Right? That’s not so expect. I never offer it, but expect that someone’s gonna ask for it.

Dave Braun
04:40:50
But there should be a period of time, a capped period of time.

Larry Broughton
04:40:53
Oh yeah. Yeah. It’s not in perpetuity. It’s usually, you know, a couple of years.

Dave Braun
04:40:56
Yeah. Cause you may decide after you sell your business and things change. Here’s a, here’s an example. Like, you know, I talked about th car mechanic and his wife with a mental decline. And, and I don’t know if this would’ve happened, but you know, say she eventually died. And he said, you know, I’m kind of bored. I don’t want to get remarried. I, I need to have a little bit more purpose. So I’m gonna open up another repair shop. I’m gonna start from scratch. Cuz he did it. He likes it. So why not? Well, you could think about doing the same thing.

Larry Broughton
04:41:29
Yeah. Like there are some industries where it just does not happen. Like in the hotel industry, when I sell a hotel, there’s no way that somebody says, okay, you can’t go do another hotel. It just doesn’t. Yeah. You know, but if it’s a specialty type of thing, you know that, that might be true. So that’s a lot of stuff. Yeah. I would say that. What we can’t forget though, is the, is the, is this following? This might even be the, the, I mean there are a lot of other points. We could have a whole workshop on this. We’re just trying to give a high level here, but you do need to ask yourself this question now what? Or what’s next. Right? Because you need to ask this before you put the thing on the market because there may be tax liabilities. You know, if you’re actually making money on this sale, there may be a capital gains. You need to ask yourself, okay. Am I willing to accept that capital gain and just write off into the sunset? Or do I wanna reinvest that into the market? Do I wanna put that money into a trust? What do you wanna do?

Dave Braun
04:42:35
Yeah.

Larry Broughton
04:42:36
Okay. Because all of a sudden, if you got this slug of cash, there are consequences there’s opportunities as well. Right? Sure. Do you really need to be smart about this? So be sure to talk to your tax accountant about, or your financial planner about what to do. Cause that there, there will be consequences. Yeah. Good and bad, of course.

Dave Braun
04:42:56
Yeah. Yeah. And then, you know, then there’s the personal aspect of what’s next, you know, what’s next for you? You’re selling. Yeah. You’re gonna have extra time to, to do what now you may have a plan for it, but some people they decide to retire and then after a month or two months or three months sure. They’re going nuts. They wanna do something else, you know? Think about that. Think about what’s next. Yeah. For you. Right. For sure. Yeah. That was, that was a great point. Larry. Glad you brought that up. Yeah.

Larry Broughton
04:43:24
Yeah. I got great points once in a while

Dave Braun
04:43:26
Every now and then. So anything else we want to add?

Larry Broughton
04:43:30
Well, as I said, yes, I mean, we could go on for a full day on what we’ve learned from buying businesses, selling businesses, advising people as they’re selling their businesses over the years. But I think this is a pretty good start on this. I would encourage folks to go back and listen, I guess this is part three, you said go back and listen to part one part two and this part three. And if you’ve got any questions about this or any lessons or keys that you think that we missed reach out, we’d love to hear from you on this. And depending on the response that we get on this, maybe we’ll do a workshop on this one day.

Dave Braun
04:44:07
Yeah. That would be cool.

Larry Broughton
04:44:08
Bring in some experts and share some experiences from people who’ve actually sold their businesses. Talk to some, maybe bring a couple of brokers in and say, who’s the ideal client you had? What do you wish that you had? You know, how, how could a buyer potentially increase the value of their business by 10% if they were to only do this. Yeah. You know, there might be some really good lessons in there.

Dave Braun
04:44:30
I think that would be good.

Larry Broughton
04:44:31
I like the idea of that.

Dave Braun
04:44:32
Yeah. I, I do too, because I mean, everybody, even if you’re not gonna sell right now, everybody wants to increase the, the value of their business. Right?

Larry Broughton
04:44:41
Yeah. Yeah. We do.

Dave Braun
04:44:42
Sure. All right. Well thank you folks for joining us today. And remember building a team is the way to reclaim your freedom. You’re gonna need a team to help you get through this. You’re gonna need a team to help you get through this sales process as well. If you’re gonna sell your business or preparing your business to sell all that stuff. Well, as you’ve listened to the, these set of three episodes, you know that we’re here to help you. Yeah, our Course and Community and our White Glove service, where we can find Rockstar VAs for you. We’ve got a Q and A session coming up here in a couple of days within our Course and Community. Larry, you could even ask us more questions on that or anything else. We’re here for you to support you, but we’d love you for you guys to do a couple things right now.

Dave Braun
04:45:29
Number one, subscribe to the podcast. If you haven’t already done. So your iPhone, your Android phone, whatever phone you got, and then also subscribe on YouTube as well, that will help you to get reminders. And you’ll see our videos pop up a lot more. And then number two is give us a rating, preferably a five star rating. We’d love to have that. But as Larry mentioned, give us a comment, ask us a question about this subject that we talked about today or any other subject. And then you can also, and we’re preparing something new, but you can get our free checklist at our site to learn what you need to do to properly prepare for hire and thrive with a Virtual Assistant. But we’re preparing something else for you guys in the background guarantees. I know I can’t, I don’t wanna say now I don’t want commit now, but it’s coming up soon and it’s related to this episode, so watch out for that. And that’s why you gotta keep coming back and listening to us. We’ll let you know when that’s available. And finally, you know, remember even without experience, you learn how to prepare for hire and thrive with Virtual assistants and you know, to get your business up and running and working well. Larry and I have helped a lot of folks. We’d love to help you too. Go to Hiremyva.com for more information.

Larry Broughton
04:46:49
Yeah. Dave, I wanna remind people of this. Now this series has been kind of a, could have real dramatic financial implications in your life. Yeah. And so I’ll just say this, everything that we say may be wrong.

Dave Braun
04:47:07
Of course!

Larry Broughton
04:47:07
Okay. We’re just sharing our experiences with you. This why you really need to get into training, involve into the process, get a broker. Talk to your tax folks. But even more importantly than that, do your self a favor, do the world a favor. Go do something significant today! God bless you, God keep you, God hold you. Till next time. See you later!

Dave Braun
04:47:31
Okay. Bye everybody.

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