Monthly Archives: December 2016

Know More About Buying a Business Through Seller Financing

Advertising and publishing veteran Janelle Regotti was looking for a business to buy. The right opportunity presented itself in 2014 when she found Guide Publishing, a company that distributed a quarterly resource guide for Northeast Ohio seniors. The only catch: Regotti didn’t have the $500,000 asking price.

With few physical assets to borrow against, she was unlikely to get a bank loan. So with the help of her business broker, she negotiated a seller-financing deal and bought the business five months later with just 10 percent down and quarterly payments due over 10 years at about 6 percent interest.

Of course, most sellers won’t finance 90 percent of their asking price. But borrowing 10, 20 or even 30 percent from a seller at a competitive rate still beats using your credit card to cover capital shortfalls. If you’re interested in seller financing, here’s what you need to know.

When it makes sense
Being short on cash isn’t the only reason to push for seller financing. These loans can also bridge the gap if you and the owner can’t agree on a price.

Renzo Aida, who bought a dance studio near Boston in 2013, will attest to that. He had the money to pay the six-figure asking price in full, but he thought the seller wanted 20 percent too much.

“I wanted him to put his money where his mouth was,” Aida says. Both parties went into negotiations and eventually got what they wanted. Aida has since increased revenue by 28 percent.

What sellers expect
Besides cashing out, sellers want assurances their baby will be in good hands. They want a buyer who has experience in the industry, a solid business plan, working capital and roots in the community, says William White, regional developer of Murphy Business & Financial Corporation, a national business brokerage firm. Sellers treat these loans as seriously as any bank would, says White, who lives in Hudson, Ohio. This means requiring a credit check, collateral (business assets and possibly your home) and life insurance. Loan terms often extend up to 10 years, interest rates are comparable with those offered by banks and it’s typical for sellers to stick around for 60 to 90 days post-sale to advise the buyers.

How to vet the deal
It’s not enough to grill the owner on the intricacies of their business. You have to scour the financials, from bank statements and cash flow to tax returns and profit-and-loss (P&L) reports. You also have to inspect the physical property to ensure all inventory, equipment and other assets are accounted for and in working order. “Otherwise, you don’t know what you’re getting,” Regotti warns.

Trusting the seller is imperative. “Make sure it’s someone you actually want to be in business with after the sale is complete,” says Regotti, who negotiated a six-month transition period during which the seller played consultant. Another must: having a business attorney in your corner, even if you’re working with a broker. Regotti adds, “I had my attorney look over everything.”

What to negotiate
Owners may not openly advertise their willingness to partially finance a sale — but, according to White, it’s common for them to consider lending at least 5 to 15 percent of the purchase price.

KC Truby of Tucson, Arizona, who has bought six owner-financed businesses over the past five decades, suggests agreeing to the asking price but getting creative on the terms. Regotti, for example, nabbed 90 percent seller financing by promising to apply for an SBA loan two years down the line. If she gets it, she’ll pay off the seller in full. Other buyers can bridge valuation disagreements with an earn-out clause that grants the seller extra pay during a set period if profits meet or surpass expectations.

“You can dream up 100 different ways to do this,” Truby explains. “It really boils down to what the owner wants to accomplish.”

The advantages of seller financing for startups
Bill Short wasn’t worried about how he’d finance FiberTech, the Atlanta-area fiber optics company he wanted to purchase. The former banking professional had stellar credit and enough money to make a sizable down payment on the business, which was priced in the “low seven figures.”

The rest, he imagined, he’d borrow. But when Short applied for an SBA loan, he was told the government body required at least 10 percent of the deal to be financed by the seller. Although Short hadn’t considered taking a loan from the seller, he was happy to comply if the terms were right.

“Seller financing helps get the deal done,” says Kent Reed of Murphy Business & Financial Corporation, the brokerage firm that worked with Short. “It helps the buyer with less out of pocket. And it gives them more confidence in the deal if the seller’s got some skin in the game.”

Short wound up making a 40 percent down payment on FiberTech, borrowing an additional 50 percent through an SBA loan, and borrowing the remaining 10 percent from the seller. “It helped me to not have to put in that additional 10 percent,” Short says. With the extra cash, he was able to boost the company’s marketing efforts, invest in vehicles and equipment and ramp up staff from 14 people to 20. Since purchasing FiberTech in March 2011, Short has seen revenue increase by about 20 percent.

Create a Podcast That Brings in More Business

If you have an inquiring mind and speak clearly, chances are, you would excel at podcasting. A podcast is like a radio show that you produce, but people can listen to it any time they like and you can record it any time you prefer. There’s no set schedule, and the equipment you need to get started is inexpensive. All you need is a theme for your show and some good ideas.

Have you ever listened to the radio and thought, “I wish I didn’t have to listen to all these ads”? If you’re like me, 99 percent of the time the ads on the radio are for things that don’t even apply to you, your interests or your needs. I often wonder about the advertisers — are they really taking the time to test and analyze whether their money spent on radio ads is actually converting? Or are radio ads just a strategy some marketing consultant told them to implement and no one is paying attention to see if there’s a return on investment?

Imagine the difference in experience when someone is listening to a high quality, informative, interesting podcast that’s ad-free. At the end of the podcast, perhaps the host (you) says, “If you’ve just heard this podcast, you earn a promotional code! Enter the code ‘WINNER’ on our website and get 10 percent off all our new…” Or “Get our free ebook on this topic at…” If you just gave 15 to 30 minutes of quality content, you’ve earned the right to pitch. And your audience is much more likely to trust you and follow your direction because you’ve earned the right to pitch to them respectfully and fairly.

According to an article, “The Rising Popularity of Podcasts,” there are six reasons a business owner should consider podcasting:

It doesn’t take much to get started.
Podcasts are perfect for storytelling.
They’re extremely convenient to consume (most are only 15 to 30 minutes long).
You can become known as an industry expert.
Your listeners are in it for the long haul (because they subscribe).
You can reach a new, targeted audience.
How to set up your podcast
There are three phases to setting up a podcast.

Phase One: Show format
Before you decide on your show’s format, answer the following questions:

1. Do you want to produce your show every week? Every other week? Monthly? Don’t do a daily show unless you have a clear strategy in place. Start weekly or twice a month. That’ll be plenty.

2. Will you have guests? (Most do!) Who are the top 100 people you’d like to interview? (Hint: Choose people who have big lists to promote your interview of them to, or who are exceptionally interesting, or whose friendship could really grow your business.)

3. What’s your one specific statement? My literary agency’s statement is “We sell good books to good publishers.” If I were doing a podcast for that company, that is the last thing I’d say at the end of every podcast, so people remember it. If you have a USP (Unique Selling Proposition — something your company does to make you unique or rare in your category), put it on an index card so you can use it at the end of your podcasts.

Phase Two: Set up your studio
You don’t have to start out with anything expensive. To start out, you’ll need the following items:

A quality microphone
A pop shield that goes over the top of the microphone (about $20)
An extender arm to move the microphone closer or further from your mouth
Headphones that don’t “leak” sound (in-ear or cupping your ears)
Phase Three: Launch like a linebacker
First you need to arrange a time to talk with your first guest. Then do some research about your guest and prepare a list of good questions that you want to ask him or her. (Decide if you want to share the list with your guest in advance — it’s not mandatory!)

Prepare yourself and your space. Put the dog outside. Shut your office door. Unplug the phone and turn off your cell. Get rid of ambient noise (air conditioning, forced-air heating, a fan etc.). You don’t need a swanky sound-proofed studio to do this. Take a few breaths and remember that this is your first podcast, and it’s normal to make a few mistakes.

When the time comes, thank your guest, tell them how excited you are and promise them that you will give them time to pitch their book, song, product, website or whatever it may be at the end of the interview.

Hit record when the conversation begins. Relax during the interview. Pay 100 percent attention to your guest. Talk naturally, but get your questions in, unless something more interesting happens, and you find yourselves walking down a different but fascinating conversational path.

At the end of the interview, ask your guest if there’s anything else you should have asked; prompt them to talk about their product or service and repeat the URL after they mention it.

Stick in your call to action — “Come to the website to get your discount code” or “Free ebook” or whatever it is that you want to pitch — and remind your audience when the next episode will be released. Tell them where, and how to get your podcasts. Finally, end with your USP, give the audience the hyperlink one more time, and thank them for listening. You did it! Podcast one is complete!

Publishing and promoting
Where do you put your finished podcast? How do people find out about it? When your audio file is ready to go, you can upload it to a site like www.LibSyn.com, which hosts podcasts in the same way that Vimeo or YouTube host videos and the same way your website host sponsors your website. From there, you promote it and make it available in various distribution arenas. The website www.LibSyn.com creates the RSS feed (Rich Site Summary) that you can use to connect to sites like iTunes, www.Stitcher.com and Google Play.

Podcast expert Stephen Woessner advises, “Just because somebody doesn’t have a network or a platform or a [mailing] list already doesn’t mean you shouldn’t start one. Go spend a couple hundred bucks on a Facebook campaign, create a website, link your website to your podcast, which you’ve uploaded to iTunes, and use Pat Flynn’s Smart Podcast Player. Drive people to your website, give them a great gift to open the podcast link.”

Making money from your podcast
Once you have a lot of regular listeners, you can:

Sell sponsorships
Have people pay to be interviewed by you
Sell advertising (like a radio station does)
Sell from the podcast (an ad at the end, a pitch during)
Convert listeners by giving them something on your website and then having your reps sell to them directly.
There are pros and cons to each option. Think it through before you determine your strategy.

All the podcasters I know consistently describe it as the single most important thing that exploded their lead generation. Of course, we know that once upon a time in the history of American business, the cotton gin and the telegraph did similarly amazing things. But heck, you’re here now. May as well take advantage of the technology that’s working at this moment in history.

More Information About Communication Determines the Success of Your Business

The story you are about to read is true except for some exaggerations which were made up. The names have been changed to protect those involved or because no one can remember them.

Earl was a run of the mill, middle aged guy that blended naturally in a crowd. But there was one element that made him stand out. He knew tricks. Lots of them. And he knew just how to put them to use.

Florida nights were hopping with ball games, movies, clubs, you name it. People were out having a great time and that’s probably what gave him the idea.

How could it not work? Who would not pay a reasonable price to come to a magic show? Can’t you see it? Families will come from everywhere, there will be music and popcorn, laughter and applause. And amazement. Lots of that. And so, it was on. The building was rented, the chairs delivered, the sound system tested and three weeks of non-stop advertising on the radio. When you hear “non-stop,” you’re likely thinking “frequent,” but almost literally it was, “89.9FM All Earl, All the Time.”

The place was bound to be packed out. Fifteen hundred seats lined the auditorium. Let’s roll.

It was the big night and at five minutes before show time, Earl waited nervously back stage. A timid peek from behind the curtain revealed only thirty people in the audience. Seventeen from the local magic club, eight who were hired to run the concession stand and a guy named Charlie with his wife and two kids. Also, Earls mama. A disappointing turn out but on a brighter note, everyone got a front row seat.

What went wrong? In a town of over 61,000 people and round the clock ads, only a few people show up?

Isn’t a family magic show a great idea? Absolutely. Could the problem perhaps be in the marketing? Let’s examine. He could have had the best show since Houdin Thurstonfield but without the right approach, the attendance was destined to fall flat.

And so it goes with business. Enterprises begin every day and fight for each dollar. They scream and yell for attention but alas the time gives out before the money rolls in and, like Earl’s great show, it’s “Curtains.”

Markets are conversations.
The easiest method for growing a business is to throw money at marketing but if that were all it took, most of us would be sunning ourselves by the seashore sporting tiny umbrella in a fruity drink with pineapple. Of course, advertising works but only as part of a much larger effort to capture and build lasting business relationships.

Interesting that the reason so many businesses fail is not due to a faulty product but a faulty communication. An effective marketing campaign should stir a response, it should begin a conversation. It should give a compelling reason for the client to reach out and receive a benefit.

Monologues that merely bellow, “Buy my product,” mainly serve to reduce the resources of the business that is already struggling. Like a game of chess, the entrepreneur should make a move, then ask his listener to make a move. This creates a dialog that leads to problem solving benefits and thereby income for the well deserving concern.

Through ads, emails, mailings, calls, bonuses, campaigns and even personal visits, we are able to create a viable relationship out of which commerce can emerge. As a wise mentor once said, “Business is still done, person to person.” This is true even of the largest companies as the customer gets the sense that a real person is involved somewhere in the process.

Had Earl begun his quest with a smaller group and built interest, had he tested his market, built a fan base, offered exciting previews and given them a chance to feel a part of the effort, he could have seen great results. Had he communicated in various ways and developed creative options through which they could respond, he might have packed the house.

As it is, he saw the result of a single effort, one-way business conversation. Success is an exchange. It is never a note but always a symphony.