A business is only as good as its capacity to sell. For first-time business owners, selling your business can be quite difficult. Fortunately, David Barnett has the answers for you. David is a professional consultant and bestselling author. He talks about everything you need to know to sell your business, from why it is important to how to do it. He asks us to look at our businesses as assets, meaning that it should be generating us income. He goes deeper into explaining the transitions people often take from being hired to creating a job. David says if we have a business goal we want to achieve, we should start with the end in mind.
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David Barnett on Selling Your Business The Right Way
I know many of you are curious about selling your businesses. We’ve talked about this but I’ve never been able to get a great expert to share their knowledge. I have with me, David Barnett. He’s been valuing businesses since 2008. He’s been a certified machinery and equipment appraiser since 2009. He was the first person in his market to earn the Certified Business Intermediary designation from the International Business Brokers Association in 2009. He’s worked with clients on the transactions and that led him to the field to preparing businesses for sale and helping owners maximize value.
In 2014, he formalized a process to help small and medium-sized businesses systematize their operations, formalize their organizations in bite-sized steps that required minimal disruption of operations. His first book came out in 2014, Invest Local, was an Amazon bestseller. In 2015, Franchise Warnings, and what I invited him to talk about is 2016, How To Sell My Own Business. All of his books have achieved top selling spots in Amazon. I know David’s busy. He does all kinds of things, engaging workshops, and small business acquisition. He’s got a YouTube Channel and blog. David, thank you for taking time out of your busy schedule to join us on Heartrepreneur Radio.
Thanks for inviting me, Terri. It’s great to be with you.
Thank you. How did you and why did you resonate with the whole concept of selling businesses? How did that show up for you?
It started in a previous career. I owned a business where I was brokering debt solutions for small business owners. People were coming to me looking for ways to get money to either start or expand their business. Increasingly, people were coming to me to look for money to buy businesses. What I noticed is that there was a real lack of expertise in my market to help people do this properly. I saw all sorts of poorly-structured deals and intermediaries that had no idea what they were doing when it came to buying and selling businesses. I ended up jumping into the field and I became a business broker. I was in that industry from the end of 2008 until the end of 2011. I ended up leaving that business model behind me. Now, what I do is I work with people all around the world to help them sell their own business instead of being a broker.
The reason I’m stoked about this is very often, I talk to business owners of all kinds of businesses and they don’t have an endgame. Some of them went into business without an endgame, but a lot of them are getting older. They’re at a stage. They don’t have an end game. What would you advise somebody who’s starting out? What would you advise someone who is getting towards the place where they think, “Maybe I should be selling my business?”
What I always tell people in my workshops and seminars is that you should have a plan for getting out of your business when you get into it. A business is an asset. It’s something that you own that’s supposed to generating cashflow for you. When I owned my business brokerage and people came in looking to sell their business, they had one of five top reasons that they wanted to sell. Those were burnout and fatigue, divorce, poor health, relocation, and retirement. Four out of those five have nothing to do with how old you are. Four out of those five are not things that we planned for.
I always advise people that if they are constantly considering the sale of their business and keeping their business in a saleable condition. Not only will it become easier for them to sell when the time comes. They may suddenly have to sell. Something can happen in our personal lives that create an urgent, pressing need to have to sell the business. Here’s the great part. If your business is ready to sell, if you have systems in place, and everything’s ready that you can hand over the reins to someone else, you’re going to end up with an easier to manage, more profitable business in the present. Paying you more to own it, regardless if it sells or not.Business is an asset. Click To Tweet
I always go with Stephen Covey. I coauthored a book with him many years and he said, “Always start with the end in mind.” When someone’s going into business, I do. I ask them what the end game is. I know that there’s a lot of coaches, consultants, speakers, trainers, authors, maybe a chiropractor who works by themselves or a beauty salon owner who reads my blog. If they’re in their business, they’re working by themselves, they’re in their 40s. They’re not thinking about what they’re going to do down the future. What are some of the first things they should be thinking about?
You bring up the whole idea of the solopreneur, the individual operator. I had a meeting with someone who has a partner. The two of them together have a small business that generates approximately the same amount of money that they would earn working someplace else. One of the first things I had to get their mind around is that if you’re in a business and you’re earning the same amount of money that you would, working for somebody else. You don’t own a business. You own a job. If you own a job, what are you going to have to sell at the end of the day? Quite frankly it’s then going to come down to the assets. You mentioned the chiropractor. You get an office with leasehold improvements, the examination rooms, all the equipment and everything that goes with that. It’s basically worth whatever used equipment is worth to the next chiropractor that wants to come along.
You may be able to get someone to pay you a little bit more than that for the fact that maybe there’s a client list already in place. Why would somebody pay you to earn the same amount of money that they could, working for somebody else? That’s why when I’m working with entrepreneurs and I’m working with people, I say, “If you want to build this into something that’s saleable down the road, we have to look at ways that you can scale your business to number two, take advantage or leverage the efforts of other people.” The chiropractor that moves from the solo practice to the office where he’s got several other practitioners, massage therapists, etc., all working together. He’s able to earn money off of the efforts of other people. Now, you’re talking about someone who’s put a business together, which would definitely have goodwill that some other practicing professional will be willing to pay for in the future.
What percentage of people goes into business and start with an end game. Do you have any idea?
I have no idea what the number would be. I know that it’s rare for me to ever run into somebody who gets into business with that endgame in mind. Most people, if you go to the Michael Gerber, The E-Myth book example, most people get into business simply because they’re trying to replace an income from a lack of employment. They decided they can’t work in a job so they start their own. What I noticed though is that as you get into bigger businesses. The people that are involved in private equity and private investments, those people, their whole business is figuring out what somebody else might want to buy. They go and try to assemble it or build it to make it. Shine it all up and make it look good so that they can sell it. You see that far more in the upper middle market space or the middle market space, for example, and not so much in small business.If you’re in a business and you’re earning the same amount of money that you would working for somebody else; then you don’t own a business, you own a job. Click To Tweet
If someone is curious about reading our blog and wants to know more, wants to reach out to you, what do they do? Who is the ideal person that should reach out to you?
Anyone who’s even thinking about selling their business, you should come on over to my website HowToSellMyOwnBusiness.com. I basically break down the selling process into five steps. The first step is education. There are easy links there to my blog and YouTube Channel, which has about 80 videos on buying and selling small businesses. As well as links to my book and a free copy of a special report, Twelve Things To Do Before You Consider Selling Your Business. It’s a place where someone can learn about the transaction. What it’s going to look like? How it’s going to be set up? For most people that get into a business that has never bought or sold a business before, it can be different. People try to imagine it’s similar to selling a house or selling a car. It isn’t the same at all. It’s quite different. When you sell a business you quite often get into, for example, financing terms. It’s difficult for buyers to get financing to buy a business. Often the only choice for sellers is to look at ways at being the bank themselves to help that buyer, for example, by receiving payments over time.
I’ve sold my own businesses. I’ve learned quite a bit here. I want to thank you. I love the name on your website. I always teach people to say exactly what it is on your website and you have a great example of a website that does that. Thank you. I’m going to suggest that my readers, that all of you, check this out. I don’t care where you are going into business, in business, in your exit plan. I’ve learned a lot. I’ve sold businesses. I mentor people who want to sell businesses. David, I’m going to turn those people over to you. You can help them in ways that I can’t. I’m glad to get to know you.
When I tell you to get a website that gives the actual result and benefit, there you go. David, thank you so much for joining us here on Heartrepreneur Radio. To my readers, please read each and every episode at Heartrepreneur Radio. Leave us some comments. Make sure that you spread the love so that we get more great people reading and greater folks like David joining us and giving them their wisdom. Thanks again and thanks David for being here.
- David Barnett
- Invest Local
- Franchise Warnings
- How To Sell My Own Business
- YouTube Channel
- The E-Myth
About David Barnett
David Barnett is a 1998 graduate of the Williams School of Business and Economics at Bishop’s University, and a graduate of UNBSJ’s Electronic Commerce Management Program. Since the late ‘90s, Mr. Barnett has been building his profile as an expert in the field of small and medium-sized enterprises.
From 1998 to 2005, Mr. Barnett was a major account representative with the Yellow Pages. This opportunity gave him an insight into the particular challenges of small & medium businesses as he dealt daily with the owners of these companies. In 2005, Mr. Barnett left the publishing industry to start a small business with a partner. Their venture was an immediate success. After opening, operating and building the business, an opportunity to sell presented itself in late 2006.
Around this time, Barnett began buying income properties. He eventually owned 3 multi-unit properties and one house which he disposed of in a lease-option deal.
In 2006, Mr. Barnett began building his professional consulting practice by starting Advantage Liquidity Partners Ltd. ALP Ltd. was a broker of commercial debt solutions for small and medium-sized enterprises including commercial mortgages, business loans, factoring facilities, and capital leases. Barnett has arranged such financing for hundreds of small and medium-sized companies. Working with entrepreneurs to build their companies and/or acquire other firms naturally led to the field of business brokerage.
Mr. Barnett joined Sunbelt Business Brokers in 2008. Sunbelt is the world’s largest network of business brokers with over 300 offices on six continents. In 2009, after completing training and testing over an 18-month period in both Canada and the U.S., Mr. Barnett was awarded the Certified Business Intermediary designation by the International Business Brokers Association which he maintained until leaving the profession. In 2009, Mr. Barnett’s company, ALP Ltd. purchased the Moncton Sunbelt office.
After completing an extensive training and testing process in 2009, David Barnett was awarded the CMEA designation (Certified Machinery/ Equipment Appraiser) by the NEBB Institute. CMEAs are located throughout the United States, Canada and several other countries, and are used by charter banks, BDC, other lending institutions, accountants, lawyers, business buyers/sellers and others to provide needed financial information for a variety of reasons.