Experience is what you get when you don't get what you want. We learn very little from our successes.Jeff: Thank you for making time for us. John, you have a great perspective in the area of helping business owners sell their companies, but not just any business owners who are a very large portion of them; however, those baby boomers out there who own such a large percentage of businesses today. But at the same time, they form a very large group who are exiting. And what I'm interested to know is someone who specialized in helping thousands of baby boomers prepare to exit their businesses.
Financial gain is great when you sell your company, but for many, many of the owners that we work with, the more important thing is to make sure the business, the culture, the employment, and the services that the customers are used to survives.Jeff: What do you think today's entrepreneurs, let's talk about the XY and millennials, could learn from baby boomers then? You may have just touched on something when you talk about hard work. Then your clients say, hard work just isn't enough to get by anymore. But what is it that we could learn from those baby boomers, from the older generation that would be of greatest value toward running a successful business today for maybe those young people who are either in college, or maybe those 30- and early 40-somethings who are working a desk job or tired of doing what they want to do and they want to start their own business now?
Companies are immortal. They'll go on forever if you build them that way.
...you don't want to be selling to somebody who knows more about your business than you do.Jeff: John has, like he mentioned, a tremendous wealth of resources for you to take a look at, and he's got a number of different websites out there. We were really just blessed to have him on our program today. John, I want to thank you so much for your time. This has been a great conversation. And again, I think it's one that we could probably have expanded a little bit, but we have run out of time. Thank you so much for joining us today on "Deal Talk" and hopefully we can have you back on the program.
Being at the top for extended periods of time can be a very lonely place. And having somebody whose only reason for being there is for you to be as successful in your professional life and as relaxed in your personal time as you can, that's what many coachees value very highly.
Everybody can benefit from coaching. So, the question would be where you get the highest returns, and that usually takes you to the leadership roles, because they cast the longest shadow.
Of course, we coaches, we are no magicians. In the end, taking action and sticking to commitments come down to the individual.
A key part of what you want to do as a seller is make the buyer as comfortable as possible.
Because in a great market you can have a mediocre company, and they can improve your performance. A rising tide raises all ships, so you still get good results. But in a weak market even the best performers are going to get clobbered.
Generally speaking, I would say the strategic buyer is the one who is more likely to pay more than a financial buyer.
There's something in the psychology term called Johari's window. It's the side that other people see that you don't see, and that's what a business wants to do, a business really wants to have someone to help them see their Johari's window so that they could address those particular issues.
This is going to be a day-in and day-out process. But with a road map or with a plan you'll be able to mark that improvement, and see that improvement, and see that improvement drops right to your bottom line.
I think each business has to really look in the mirror. I’m always talking about looking in the mirror. They need to compare themselves against the best in class.
We have found that by specializing, that has allowed us to become very focused and actually substantially increase the quality of what we do. When you do one thing over and over again, you tend to get very good at it.
The biggest difference is that we have a large support staff, like accounting and law firms. Most brokers are solo, with no support staff at all... Another major difference is that we cut out the number one investment of time in the deal, which is physically meeting with the buyers. We feel very strongly that this is unnecessary.
We model our fees after other professionals like accounting and law firms. We work on a fee basis with a small success fee on the backend of the transaction.
First, we would have a phone meeting with you, the owner. We discuss your objectives, your business, the industry, and dozens of other questions about your business. After that meeting, we would prepare a framework of our recommended steps. And no two transactions or businesses are the same. So every single one of those is customized. Next you would review the process or framework, discuss it with your advisors if you want to, and then we can tweak the process if necessary.
Jeff: I was wondering if you can share with us, Mike, what factors made you decide to buy this specific location from Dan Ness and this specific business, Miracle Method?
I think due diligence is extremely important, and both a CPA and a lawyer [are] the two primary people who would help with the process.
Jeff: Do you essentially have the same number of people, the same number of personnel on board now that you had when you first started? Or have you been able to grow the team at all to this point, or is that still in the works?
When you own a small business, your employees or your team members really look up to you, and you need to be able to connect to them. You need to make sure that they're comfortable with you. That's the only way that they're going to perform well. That's the only way that they're going to give their best to work on your business.
International trade shows are an excellent opportunity to learn about the market — because this is a marketplace. This is like going to a traditional marketplace 2,000 years ago when all the traders were in the same place.
I believe you need to spell out very clearly — first to yourself, to your team — what are you trying to communicate? Because you might be targeting the right audience in the right place, understand the people, but if you don't communicate clearly your brand, you may fail.
Define clearly what is your goal in the [trade] show, and then make sure you select the right show. Once you do, the benefits are tremendous.
If people don't recognize your brand, it will be very difficult to do any kind of business. You will struggle to find any representatives, any distributors, and even it will be difficult to find clients.
Jeff: Business brokers aren't merely in the business of selling your company and making a quick dollar. In fact, if you want to know how valuable a business broker can be to the value of your company, you've come to the right place.
From our studio in Southern California, with guest experts from across the country and around the world, this is "Deal Talk," brought to you by Morgan & Westfield, nationwide leader in business sales and appraisals. Now, here's your host, Jeff Allen.
Jeff: Welcome to the web's number one content source for small business owners committed to building a business for eventual sale. Here on "Deal Talk" it's our mission to provide information and guidance from our growing list of trusted experts that you and all small business owners can use to help you build your bottom line and improve your company's value.
If you're tuning in to get some guidance, some tips, some information on how you might be able to today improve the value of your company, I am talking with someone today on our program who is in the business of helping his clients do just that. And who knows, maybe somewhere down the line you might be able to get in touch with him. We're going to provide his contact information later about your particular situation, if you're interested in selling your business that is. His name is Nelson Bayford, and Nelson is a business broker and commercial specialist with Business Finders Canada. And what we want to talk to Nelson about today is how he works with people, and really kind of get his general thoughts on how business brokers can best help their clients, and that is you. If you've got a business for sale and you're looking for a way to elevate its value.
We're out to prove today that business brokers are far more than those individuals that you would go to just for the purpose of selling your company. They provide greater value than that. Nelson Bayford, I want to welcome you to "Deal Talk." It's good to have you in. Thanks for joining us today.
Nelson: Hey Jeff, thanks for having me.
We talk about a lot of different business owners that own a lot of different types of businesses. But in the end, all businesses are there to generate income and profits for the shareholders.
Jeff: We appreciate you, and what I thought might be kind of a nice way to get started here just as an icebreaker is to tell our audience a little about yourself and how much skin you have in the game of not only selling companies and finding buyers for them, but also in business ownership yourself. Your experience goes way back and it's pretty deep. Tell us about it.
Nelson: Yeah, that's right, Jeff. In the real estate investment, finance, business brokerage business for a long time now. I guess about 40 years. And obviously I enjoyed it because I stayed in the same industry that long. Now, here in this stage of my career I'm really enjoying a business brokerage which I started with Business Finders Canada about six years ago, and really enjoyed the process of helping business owners first of all find a way to speak with someone confidentially to talk about their business and help them determine the most probable selling price through a very detailed valuation system and take it from there.
Nelson, we appreciate having you on board today, and I'm really looking forward to this conversation with you. We may have already kind of given away the answer, or at least a majority of the answer to my first question, which is really kind of helping to clarify what a business broker does. Because a lot of folks nowadays in business for themselves, entrepreneurs have a lot of choices, they have a lot of directions that they can go when it comes time to sell their companies.
But if you could, could you clarify exactly what a business broker is and does these days, or at least what the really good ones should be doing these days. I know that you've got enough experience in the background. You can kind of share with us on that.
Nelson: I think the primary role of a business broker is to create that platform where a seller can comfortably speak with the business broker really detailed about their business without worrying about where the information is going to go. So confidentiality is so critical that a good business broker has to be very versatile in being able to understand all kinds of different businesses.
We talk about a lot of different business owners that own a lot of different types of businesses. But in the end, all businesses are there to generate income and profits for the shareholders. And so we key on just what that number is and place our valuations around that key number, which is referred to as normalized earnings, or seller discretionary earnings, or many different ways that people talk about that.
But I think the key job of a good business broker is to really help a business owner get a good opinion of value through a detailed valuation process and then take that business to market and work with qualified buyers.
Jeff: What have you found in your experience, Nelson, to be some of the most common yet fixable factors that actually hinder value or could stall a company from being able to improve its value?
Nelson: I think probably the old saying, “it's all about details.” In business what I've seen a lot is where companies have agreements and contracts with suppliers where they have some exclusive right to sell or distribute something. Or some proprietary method of doing something. And perhaps what's happening is that they go to sell their business and those contracts aren't up-to-date. Or they have some special way of doing things but they haven't patented it or branded that.
And so I think it's all about making sure that anything that you are selling forward, contracts or customers that you've dealt with for a long time, if you're selling your goodwill you want to make sure that you've got an up-to-date customer records, any contracts, leases. I think that's one of the primary things that an owner has to look at when they're going to sell a business, make sure that all the details are in order.
Jeff: Nelson Bayford joins us today on "Deal Talk." Nelson is a business broker and commercial specialist with Business Finders Canada. Nelson, the website for that, is that BusinessFindersCanada.com, is that correct?
Nelson: Yes, BusinessFindersCanada.com.
Jeff: Very good. And we're going to provide Nelson's contact information so you can reach him directly at the end of this program. Nelson, you typically have a goal for how much you try to get your sell-side client as a percentage of your opinion of value, for example. In other words, should a business broker, and obviously we're kind of looking at you today. Should a business broker in general have a pretty good idea when they sit down with you as the business owner or the client about how much they would look or try to get you in terms of what your valuation is?
Nelson: Yes, I think definitely. For example, going back to this whole idea of having a good market valuation or opinion of value. That's why I think it's so important, because that to me becomes the basis of moving forward with the seller. That's why we always insist that we get a market opinion done by ourselves. We want to go in there and do this valuation. We're not looking for anyone else to do it.
Because when we sit down with a seller after we've gone through that process of looking at their three to five years of financial assets their balance sheets, etc. And we've come forward and say, “Based on what we see here is our opinion of value," we want to be able to look square in the eyes and say, "This is what we can sell this business for," and to your other part of the question, how much do we try to realize. One we've got that opinion of value we tried to add a little bit on there for negotiation as well. Because we know that in any, probably in most, I guess, buying and selling situations is going to be some negotiations.
I would say that we achieve approximately 80%-85% of our opinion or value on our sales. And our sales, by the way, our sell through rate is approximately 80%. And I think that's because we've spent so much time on the front end, getting on the same page with the seller as to what the value is.
Jeff: When you say “sell through rate,” exactly what is that? Define what you mean by sell through rate.
Nelson: OK. What I mean by that is once we've established and we’re on the same page with the seller about what the price is and what the selling price should be, once we begin our marketing, we know it takes us seven to nine months to sell a business typically. Sometimes sooner, of course. But our success rate is well over 80% of the listings that we take. It's sold within the listing time frame for 80% of the price, which it has that 80% is allowed for some negotiation. Did that clarify that for you?
Jeff: It sure does. You make every attempt to get to 80%-85% of that valuation for the seller. That's kind of your target zone. And of course the rest of that room for negotiation above and beyond that there. And then your sell through rate, which means your rate of success is 80%. And it would seem to me that compared to industry averages that's pretty good isn't it?
Nelson: It is. I think we're probably at … But Jeff, I go back to, and I know I sound like a broken record on this. But I go back to the fact that it's all on the front-end how much time you spend with that seller getting whatever information you need to do a proper opinion of value. A lot of sellers might think their business is worth X dollars because that's what they want to retire on, whatever reason they come up with that number.
I think that's one of the primary things that an owner has to look at when they're going to sell a business, make sure that all the details are in order.
Jeff: Usually it's much higher isn't?
Nelson: Most of the time. And sometimes lower, but most of the time higher. And the key I think to be a good business broker, I think you've got to be willing to say to a seller, "Based on our analysis, and here's how we've come up with this number, look at our methodologies here. This isn't where we're coming up with the value, this is how.” And if we can't get on the same page, there's no sense of trying to do business because we can't achieve a sale if there is an unreasonable asking price that's not supported by the financials and the assets of the business.
Jeff: Nelson, once you've submitted your opinion of value, and you believe that value can be elevated, you may have some ideas for how the business owner can do that prior to actually selling their companies. How do you work with those business owners to discover and implement important value drivers that you may in fact recommend?
Nelson: A lot of times when business owners are thinking about selling the business, maybe to some degree that they've taken their foot off the gas pedal over the last two or three years. So maybe it's just as much to say, encouraging them to really get on top of their game, run the business with enthusiasm during the early years. Make sure that sales are trending upward and do everything possible to make that happen.
Some of the things that you can do is just simply, if you've been in business a long time start making sure you're in touch with your customers. Make sure that you're providing the best quality service that you can. Some of the other things you need to that we've already talked about, make sure that all your agreements are up-to-date, whether they're leases, or contracts with suppliers, etc. Just get your business running as best you can.
Jeff: Nelson Bayford, business broker and commercial specialist with Business Finders Canada joins us on this edition of "Deal Talk." My name is Jeff Allen. And when we come back from this short break I'd like to talk to you, Nelson, about maybe any stories or real life examples you may have of having worked with a client and you were able to help that company perhaps raise its value and maybe even received more than the business owner had originally thought that he might get at the signing table. Or maybe got more than maybe you might have even thought that you got at the signing table.
We're going to do all of this when "Deal Talk" resumes right after this.
If you'd like to share your knowledge and expertise on any subject related to selling businesses or helping business owners improve the value of their companies, we'd like to talk with you about joining us as a guest on a future edition of "Deal Talk." Interested? Contact our host Jeff Allen directly. Just send a brief email with "I'd like to be a guest" in the subject line. In a brief message include your name, title, area of specialty and contact information, and send it to firstname.lastname@example.org, that's email@example.com.
Selling your business may be the most important business transaction you'll ever undertake, so don't go it alone. Work with an organization that has made it their business to sell businesses and that's all they do. Morgan & Westfield at 888-693-7834. At Morgan & Westfield we know that selling your company is not something you should take lightly. It can be a stressful, difficult, even emotional process. That's why it's important to work with a team whose one and only specialty is selling businesses throughout the United States. And Morgan & Westfield will help you every step of the way, from helping you plan your exit strategy to preparing a comprehensive appraisal and locating the right buyers.
Without the right team behind you, you could be leaving money on the table. So don't leave your most important business transaction to chance. Call Morgan & Westfield for a free consultation at 888-693-7834, 888-693-7834, or visit morganandwestfield.com.
Are you a professional adviser, accountant, attorney or a wealth manager, or do you provide other professional services? Contact us today to see how our reliance program can help you increase your firm's revenues. Call Morgan & Westfield at 888-693-7834. That's 888-693-7834.
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I'm Jeff Allen with Nelson Bayford, business broker and commercial specialist at Business Finders Canada. Nelson, what I'd like to do is find out from you maybe a short story that you may have from your past and working with your clients the situation where maybe you were able to help a company elevate its value and receive more than maybe either of you had originally thought when it comes time to selling that business and they were able to take home more money at the end of the day. Do you have anything that you can share with us?
Nelson: Yeah, that's really pleasant with something like that happens when you actually realize more in a sale than what you originally anticipated, and that's happened a few times. One story that comes to mind was a small manufacturing company. They have been doing things pretty much the same way for the last 20 years.
One of the things that they were not doing is they weren't really reaching out to new customers. They didn't really recognize that it was going to be such a... And I'm going to say easy way for them to increase your sales fairly quickly by just adapting some search engine optimization ads out there, and they started doing some email marketing campaign based on what we're talking about. And these might sound like really simple things, but this was an older couple and a family business with some long term employees both in the administrative and marketing part of their business and they just weren't on top of that.
I just made a few suggestions and it happened very quickly that their sales started to increase so we had to go back and review where we had put the value on the company. And it's pretty obvious this company was going to continue to grow their sales with some additional marketing. We sold it for a little bit more than we'd originally listed. So that was all about just getting the company to go after their sales a bit more.
Jeff: And I know, Nelson, that you said you have some other examples, and we might ask you to come back and share those with us at another time. After you've rendered your opinion of value, typically speaking, what is the process like for the business seller from that point? What happens after that? You talked about the sales process being seven to nine months, but what does that seven to nine month period entail with all the steps that are involved?
Nelson: That's a good question. Because I think that one of the most frustrating things for sellers. And it's really, really important as I said to get the valuation. There's different people that get valuations, but when it comes to actually selling the business I think it's really being able to follow up with people that are inquiring about the business, and really, really being able to qualify these buyers as to... First of all, do they have the financial capability to buy the business? Do they have the relevant experience? What is their time frame?
Today, our business is all technology driven; 99% of our leads come through the internet. And it's really easy for people to hit a button on the internet, so that it's really, really important to qualify people. The process starts with qualifying that buyer, and then disseminating information out to them on a confidential basis. And eventually getting that conversation going between buyer and seller. And being that buffer between the emotions between buyers and sellers. And then negotiating a contract that makes sense to both parties. And just carrying that all the way through to the end of the deal.
I'd say the most important thing when you start a business is determination to succeed, because I don't think there's a business out there that is going to perform exactly the way you've laid it out there. There's going to be all kinds of things happening. It could be labor issues or employee issues. It could be initial sales aren't meeting your targets, it can be suppliers, or not giving you what you need. There's many, many challenges in running a business. I think number one is determination.
Jeff: How many bids will you receive, or how many interested buyers might you be working with at one time in the early stages to kind of vet them out and determine which ones are most suitable? Are we talking three, five, 10 perhaps? Or maybe you can kind of shed some light.
Nelson: I think if a business has been exposed for a month or two, I would say that within a month you'd probably... our office anyways, I have five colleagues that work with me in Business Finders, in our particular office. And I would say that within a month or two of having a business properly promoted and marketed, you're going to have a half a dozen of interested parties. And so it becomes a person in the middle which is the buyer that is best suited and moving forward with that particular buyer.
Jeff: How involved is the seller in kind of the process of getting the company ready to sell and preparing for that occasion when the negotiation actually begins?
Nelson: I think by the time we get to writing a contract of purchase and sale for an asset sale, or a shared purchased. I think the seller's probably done most of the work that you need to do at that point because we've gathered that information on the front and we know that business pretty intimately by trying to get to a contract stage.
So basically I'd say at that point there’s not much the seller really needs to do other than to maybe provide additional documents for the buyer's due diligence, ultimately the formal contract is done between the buyer and seller's attorney.
Jeff: I wanted to save some time here in the program for you, Nelson, to just kind of put it in your own words. I know that you're very passionate and you've shared this with me about helping first time business owners grow their companies. And I was wondering if there's any guidance that you can kind of share, words of wisdom perhaps to help entrepreneurs of early stage businesses work toward a pattern of sustainable growth. And if you can share that that would be wonderful. What are some of those most important keys to success in the early stages of owning a business?
Nelson: Well, I'd say the most important thing when you start a business is determination to succeed, because I don't think there's a business out there that is going to perform exactly the way you've laid it out there. There's going to be all kinds of things happening. It could be labor issues or employee issues. It could be initial sales aren't meeting your targets, it can be suppliers, or not giving you what you need. There's many, many challenges in running a business. I think number one is determination. I think is the number one key to succeed in business. Because if you have a goal, have an objective, and you really want the business to succeed, stick to it, make it happen.
One of the things that's golden in any business is the old golden rule, take care of your customers. And that doesn't mean just during the time of the transaction but staying in touch with your customer, and there's so much good software out there today that helps people stay in touch with their customers, whether it's remembering birth dates, or remembering important things for the customer, a little note here a little thank you note there. I just can't say enough about just staying in touch. It doesn't take that much to do that.
Jeff: Those are great words of advice and very, very simple it seems. But sometimes I think, Nelson, we forget about the common sense types of things because we get so wrapped up in the day-to-day. And common sense really, it works in our personal lives, it can work in our business lives as well and help our business overall. And also, too, not only that but you're making people feel good about you. You're heightening your credibility and integrity. And that helps not just you, your clients, but also the other members of your team as well, and I want to thank you for that.
There may be some individuals listening to this program right now who'd be very interested, Nelson, in talking to you about ways that you might be able to help them, help them with their businesses, help them sell their companies. How can they connect with you?
Nelson: They can connect with me by my email is firstname.lastname@example.org. And one of the things I was interested in when I was invited to come on the show, Jeff, one of the things I just put out there is that I live in a beautiful area called the Okanagan Valley of British Columbia. And we have a really, really good economy right now, and it's a great time for U.S. investors and buyers to look at this market because of the exchange rate on the dollar. Plus, our economy is very strong and there's lots of good opportunities up here in Canada.
Jeff: And I'll bet you that there's some residential real estate available too to new and aspiring business owners in your neighborhood. And I'll tell you something, it is beautiful there. I know people who frequent that area very, very often, in fact have second homes there. Nelson, I really appreciate you for taking time out of your day and out of you schedule to give us a call and talk to us about what a business broker is and how they add value to a company prior to its sale. And again, I want to thank you so much and I hope that we can reconnect again in the future.
Nelson: Yes, it's been a pleasure, and I just hope that your audience got some value from this. And again, thanks for having me.
Jeff: I know that they did, Nelson, thank you. Tell a friend about "Deal Talk," won't you? We feature guests like Nelson Bayford on each and every program. We try to find the best of the best. Nelson Bayford, of course, business broker and commercial specialist with Business Finders Canada, and you can listen to this show all over again on any one of our four channels. We are featured on iTunes, Stitcher and Libsyn in addition to morganandwestfield.com. Now, if you tune in to morganandwestfield.com for this program we'll feature the entire transcript of today's conversation there for you so you can download it, print it out, and refer to it again and again.
"Deal Talk" is brought to you by Morgan & Westfield, nationwide leader in business sales and appraisals. Learn more at morganandwestfield.com. My name is Jeff Allen, thanks again for tuning it, and we'll talk to you again soon.
While we take reasonable care to select recognized experts for our podcasts please note that each podcast presents the independent opinions of such experts only and not of Morgan & Westfield. We make no warranty, guarantee, or representation as to the accuracy or sufficiency of the information provided. Any reliance on the podcast information is at your own risk. The podcast is for general information only and cannot be considered professional advice.
Jeff: Let's just go ahead and hear a little bit about your background, if you could kind of share where you've been, what you're currently doing now with KLO.
The first thing they have to admit is that they're not the expert at selling their business, and they really do need to get a specialist involved. I've said it before, it's the old story. You do need to let specialists help you, because they will benefit you and benefit the final price you get.
Jeff: Just to let you know, if you're listening to the program today on iTunes, or maybe Stitcher, or Libsyn, thank you so much. We appreciate your comments and feedback there, and your reviews are also welcome.
When a purchaser buys a business, they want to be able to tick a box in every area. They want to be able to tick the box that the taxes have been paid, that the sales are good and they're going up, that the margins are good, that the employees are happy and motivated, that everything in the business looks good.
Jeff: Mark, we're running short of time here, so I'd like to kind of jump ahead a little bit and ask this question of you with respect to getting down to the end of the line.
Selling a business is not an event, it's a process.
When I negotiate every dollar of benefit that I negotiate for myself is a dollar out of your pocket and vice versa, there's no value created. When we're negotiating between two companies to provide a product, we can negotiate many items beyond price. … We can negotiate those issues and develop a contract where we actually create value.
And when we sit down and we work to become a good customer to a supplier, and we sit down and we have a rational, thoughtful conversation about who should do what to minimize the total cost of the supply chain, we can create a ton of value for our collective supply chain and how we serve our collective customers.
And what I found is that people get comfortable with their existing supplier and they do not like having a difficult conversation periodically that we're going to be putting it out to bid. And in fact they're concerned that they could disrupt their supply chain if they go down that path. And so there's a certain level of fear of change and of unknown that kind of prevents people from taking a deeper dive.