EP 54: Frequently Asked Questions for June 26, 2020

Ed Mysogland  0:01  
Please welcome please welcome welcome. This is another episode of the defenders of business value podcast, podcast where we talk about what makes a business valuable. They're the tips and tactics to increase your company's value that only veteran filmmakers know. And now, here's your host in misos land. Welcome to frequently asked question Friday, I'm your host Ed my sick land, I help business owners make sense of the value in their company so that one day they can sell it when they want, how they want and to whom they want. Each week, I answer three questions about business value or selling companies that come in from the website or social media. This is a little bit shorter of an episode, but hopefully, it will be helpful in your journey to making a saleable company. Alright, so let's get to it. So the first question that came up is stemming from my conversation with Jim marcab. Last week. So the question was about financing. You know, how what, what was my solution to, to financing African American, the African American community business buyers? When John Jamar and I were talking, we were talking about how do you get capital, you know, to to that community, that isn't startup capital. Alright, so the borrower may have two to 3% to put into a deal. And then you have the availability of SBA financing or conventional financing, but you got to get to that threshold, where you have enough of a downpayment that qualifies you to take to take the next step into,

into the lending community. So what we were talking about is, you know, wouldn't it be great to have some sort of basically mezzanine financing, that would bridge the gap between the borrower's two to 5% and then thereafter, offer that financing so that the borrower could move forward and apply for the loan. Now, there's, there's certainly some some opportunity with the SBA seven a program where you can utilize seller financing as equity. But again, this was more of a Alright, how do you how can we come alongside the community, find some additional capital that's already been allocated toward entrepreneurship and apply it to business buyers, rather than, you know, the startup community? So hope that helps.

So the next question is, I don't want say, an easy one, but it's kind of easy. I received an email on whether or not it's a good time to buy retail businesses due to due to the pandemic and the urgency of business owners to sell in that space. So I guess the short answer is, I'm not really certain that's the case that you want to, to get into the retail market. Now, the caveat is, if you're competing online with an Amazon or the there are substitutes that you can find online. And you don't have that much of a novel product. You might be outgunned it from it from the standpoint of the consumer being able to find the product somewhere less because they don't have the overhead that you might have. So I guess from a evaluation of the opportunity, I think you need to see what you're selling and do a do an analysis on Where where are the substitutes, and can you effectively compete. So I hope that one helps. Alright, the last question is about making an offer to acquire a company. So the question is, how binding is an offer? Well, from Well, number one, I'm not an attorney, and you should absolutely seek counsel as far as vetting what I'm about to tell you. But from our standpoint, from a brokerage standpoint, a couple things one, your offer does not necessarily commit you to buying the business. It is simply a framework for which under certain circumstances, you are willing to buy the business but it has to meet certain circumstances. So you know, that's the first step. We have to get to a point where you have various conditions and can and contingencies on on what's going to induce you to go ahead and take the next step. So obviously, like financing due diligence, leases, Customer Identification at the appropriate time. But again, if you can't agree on price terms and conditions, it's really meaningless to to take, take the next step and start removing contingencies. So again, remember that you're absolutely not committed to doing a deal while you're doing your investigation, plain and simple. So I hope that helps. And if you need some additional detail on that certainly reached out to me or any of my colleagues at the brokerage. All right, well, that about wraps it up. But before you go, would you like to receive a weekly newsletter of curated articles that I've stumbled upon or am writing about regarding business value and making a company saleable? Well, if so, go to defenders business value.com and sign up for the newsletter. Now, if you have a question that you would like answered, Go to Again, the website defenders of business value.com and push the appropriate button. Or you can email me at ed at defenders of business value.com Or you can reach me at Twitter at Ed miso. Thank you so much for spending time with me. If I can ever be of help to you in any way, please don't hesitate to reach out. Have a good weekend, and I'll see you next week.