Advisors & dealmakers need to know . . . |
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New Video: Part 2 “Q&A About Pre-LOI Due Diligence (to avoid cratering deals)”
Will buying the bubble burst your acquisition? Too many people buying small and midsize businesses are falling for nonsense being pitched to them by sellers and their representatives. Worse, we're seeing so-called business appraisers, in their reports, ignoring the valuation effects of Covid. And, some lenders, in their rush to approve unrealistic loans are further putting buyers at risk. Here are widely known examples showing what's risking large and SMB deals. (For decades I've trained and guided people to find and buy the right businesses the right ways. I’m not a broker. I don’t sell businesses.)
Reality check:
- Covid reveals opportunity and downside risk plus the resiliency of companies. Ignore it at your expense.
Guess what?
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Avg cash multiples (to price businesses for sale) have not much changed since Q1 2017 (3.05) and Q3 2021 (3.07) . . . according to this report . . . despite what some people are touting.
Evaluate this entire report with a discerning eye: BizBuySell Insight Report―Q3 2021―Small Business Acquisitions Command Record High Prices, Owner Confidence Builds as Buyers Compete for Strong Performing Businesses.
- Also notice record low pricing!
- This info may not directly pertain to your locale, but it is probably influencing what’s happening near you.
Eyes W-I-D-E Open!
- Reports, such as the above, do not represent the entire SMB marketplace.
- Up to 80% of the best businesses, in some sectors and sizes, that sell are sold by-owner; the report omits that.
- Expect brokers, sellers, their enablers and wishful thinkers to shout about the rising, high prices for recent sales.
- Pay attention to sectors.
- Pay attention to your target ROI.
- And your lost opportunity income, which occurs while you defer your done deal.
Lenders expect business buyers to have an advisory team. This, from an SBA preferred lender, alerts you to the importance of having identified your advisory team early in due diligence. And then, within your application for funding, show the composition of your post-completion advisory board.
- “Self-funded searchers using the SBA loan program need to take a page from the tried-and-true traditional search fund model, forming boards and leaning on advisors. One might assert that for the SBA program, where searchers and CEOs will take on larger levels of debt, the need for outside advisors might be even more important. Our bank lending team has been thrilled to see the level of diligence increase, with more emphasis on creating a professional advisory team for the diligence phase as well as for operational advice.”
Actually, this is common sense, isn't it?
But, I continually see searchers deferring the assembly of their team. it may be why so many searchers defer their success, too. Isn't it a good idea for searchers to understand their monthly lost opportunity income?
I can help you evaluate specialists, especially accounting and legal, if you're not sure you have the right kind of advisory team, which includes you being able to access experts when you need it. (I saw a deal almost fail thanks to an unavailable lawyer. It would have failed, too, had there been buyer competition.)
Video: Part 1 of “How Pre-LOI Due Diligence Can Crater Deals” shows the reality, scope, tips.
- Watch his newly added video on his homepage.
Video: 12 Ways to Sharpen Your Search for a Business to Buy.
There are lots of books for buying a business. This one focuses only on the search,
because you can't buy if you can't find worthwhile opportunities.
The Good, Bad and (really) Ugly CIMs and CBRs - (Viewer Discretion Advised)
It's rare to see well-written, finely-crafted CIMs/CBRs that adequately disclose information about businesses for sale. See and listen to how I and M&A transaction attorney Scott Weavil dissect some of the worst and one of the best-of-the-best. It can help you judge the scope and transparency of what brokers/sellers present to influence you when it counts most: Upfront.
- Share your perception or experiences with me and then I’ll include them on the webpage where I am elaborating on this topic. Your ideas can be posted with attribution or anonymously. I won’t identify you without your written permission.
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Breaking News |
Tips and Success Stories
Reality • Scope • Tips
Too many deals fall apart before the LOI / HOT
(or upon submission of it) because of the mishandling of the kinds of due diligence
that happens early in the communications between buyers, brokers, and sellers.
And sometimes lenders. And maybe, thanks to lawyers and accountants.
Video: Sharpen Your Search to Buy a Business.
Knowing what to do is important. It's more important to know how to do it.
Here's something you or someone you know can emulate:
How I acquired 12 small businesses and then combined them into a new company, franchised it and then sold the company. In less than 2-years. That, and more, in the podcast "Top M&A Entrepreneurs" hosted by Jon Stoddard.
- You'll get 14 dealmaking tips and insight that few people know.
The best CIMs/CBRs do quadruple-duty.
- Test, upfront, the broker/seller transparency; their willingness to disclose what's most important.
- Roadmap due diligence.
- Foundation of business plan, which you'll need for financing.
- Foresee transition from seller-to-buyer.
The CIMs I reveal, in the recordings of my webinar, does it for you. So you can focus on verification and evaluation. You won't have to waste (as much) time and money trying to pry information out brokers/sellers.
But beware. Don't let the shine blind you.
Listen to what my clients are saying:
Cash flow? Isn't now is a good time for everyone in business or wanting to buy or sell a business to squeeze more cash out of the pipeline? Do it more profitably using this. Lots of people have used it for decades to increase the cash flow of small businesses 10% to 25% within 90 days.
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SMB M&A new podcast series ― Transforming Potential No-Deals to Done Deals
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2021 Insights for Business Sellers and Buyers
Seeing opportunity. Avoiding trouble. What's happening and coming during the pandemic and financial crises.
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My 50 interviews of leading dealmakers. |
You (or people you know) are invited to podcast with me. 10-minutes max.
I'll handle all the production. And then we'll publicize your dealmaking capability.
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Searching but not completing business acquisitions? |
Pretend you're looking for a job.
Would the owner of the company you want to buy hire you to run it?
This question is particularly important for buyers wanting sellers to finance part of their purchase.
Too many searchers fail to convincingly demonstrate, upfront, how they can successfully migrate from what they’ve been doing to what they want to do.
Solving that dilemma is one of the most important things I do for people who hire me to help them prepare and then find worthwhile businesses for sale. Sooner. More safely.
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How Buyers Think
and How Owners Use the Buyer View
to Prepare & Sell Their Small or Midsize Company
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Answers to 20 questions, from one of our most popular seminars.
This is definitely not for the faint of heart. No sugar coating or kumbaya language.
It’s what you need to know before entering the dealmaking field.
If you want to avoid unnecessary trouble and costs.
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There’s not much more needed right now than for SMBs to improve their cash flow.
The ultimate DIYer action plan.
My free (and seriously playful) booklet.
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Here's what I do for searchers and buyers: |
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I enable buyers of profitable small and midsize businesses
in the USA, Canada, Australia and the U.K.
to be the 1st choice of brokers and sellers,
which results in more-profitable done deals sooner
with less aggravation at lower cost.
Read my how-to books.
And then let me help you deploy my proven best practices.
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U.S. Small Business Administration
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Searcher and Search Evaluation
Want to buy a business . . . sooner?
You (or your clients) can substantially lessen risk and the time searching for business acquisitions.
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Savvy Buyers Avoid Buyer Competition! |
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Please forward this to people who could benefit from it.
It’s always a good time to search
for SMBs to buy
(without making commitments).
It’s usually a good time to buy
IF you buy mature, profitable
and fairly-priced businesses
with sustainable competitive advantages.
AND if the deal is done in the
context of economic circumstances.
AND your terms of purchase are
flexible enough to handle what’s coming.
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Join my LinkedIn group:
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A really big tip for business buyers:
Don't buy a company if it won't position you to grow by M&A.
Otherwise you might be buying a job.
And unnecessarily coping too much with your competition.
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I refer prospective clients to advisors, brokers, appraisers and sources of financing who subscribe to my monthly free e-newsletter AND also connect with me on LinkedIn.
Please share this with people who might enjoy it.
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The Original Business Buyer Advocate ®
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