Seller Financing: It Makes Dollars and Sense

When contemplating the sale of a business, an important option to consider is seller financing.  Many potential buyers don’t have the necessary capital or lender resources to pay cash.  Even if they do, they are often reluctant to put such a hefty sum of cash into what, for them, is a new and untried venture.

Why the hesitation?  The typical buyer feels that, if the business is really all that it’s “advertised” to be, it should pay for itself.  Buyers often interpret the seller’s insistence on all cash as a lack of confidence – in the business, in the buyer’s chances to succeed, or both.

The buyer’s interpretation has some basis in fact.  The primary reason sellers shy away from offering terms is their fear that the buyer will be unsuccessful.  If the buyer should cease payments – for any reason – the seller would be forced either to take back the business or forfeit the balance of the note.

The seller who operates under the influence of this fear should take a hard look at the upside of seller financing.  Statistics show that sellers receive a significantly higher purchase price if they decide to accept terms.  On average, a seller who sells for all cash receives approximately 70 percent of the asking price.  This adds up to approximately 16 percent difference on a business listed for $150,000, meaning that the seller who is willing to accept terms will receive approximately $24,000 more than the seller who is asking for all cash.

Even with these compelling reasons to accept terms, sellers may still be reluctant.  Selling a business can be perceived as a once-in-a-lifetime opportunity to hit the cash jackpot.  Therefore, it is important to note that seller financing has advantages that, in many instances, far outweigh the immediate satisfaction of cash-in-hand.

  •  Seller financing greatly increases the chances that the business will sell.
  • The seller offering terms will command a much higher price.
  • The interest on a seller-financed deal will add significantly to the actual selling price. (For example, a seller carry-back note at eight percent carried over nine years will double the amount carried.  Over a nine-year period, $100,000 at eight percent will result in the seller receiving $200,000.)
  • With interest rates currently the lowest in years, sellers can get a much higher rate from a buyer than they can get from any financial institution.
  • The tax consequences of accepting terms can be much more advantageous than those of an all-cash sale.
  • Financing the sale helps assure the success of both the sale and the business, since the buyer will perceive the offer of terms as a vote of confidence.

There are no guarantees that the buyer will be successful in operating the business.  However, it is well to note that, in most transactions, buyers are putting a substantial amount of personal cash on the line – in many cases, their entire capital.  Although this investment doesn’t insure success, it does mean that the buyer will work hard to support such a commitment.

There are many ways to structure the seller-financed sale that make sense for both buyer and seller. Creative financing is an area where your business broker professional can be of help. We can recommend a variety of payment plans that, in many cases, can mean the difference between a successful transaction and one that is not. Serious sellers owe it to themselves to consider financing the sale. By lending a helping hand to buyers, they will, in most cases, be helping themselves as well.

Contact us to learn more about selling your business, or to learn about opportunities to buy a business in New Mexico.

6 Tips for Managing a Positive Customer Experience

Customers are venturing back out to shop, dine, and feel a semblance of normalcy. However, the consumer experience has changed since the onset of stay at home orders. Social distancing requirements, masks, and ubiquitous hand sanitizer are reminders of why we need these precautions. We know that emotions strongly impact purchasing decisions. Anxiety and frustration are common, and disappointed expectations can make things worse. Make your business feel good. It will help customers be comfortable now and build loyalty that carries into the future. Here are six tips for welcoming your customers back into a positive experience, even if things are different.

Make sure your business looks and feels clean

Many people are still very worried about their and their family members’ health. You can cheerily model healthy behaviors at your business to help customers feel safe. Calmly make your efforts to protect customers visible. Employees can clean surfaces while customers are shopping. Anyone at a register can frequently use hand sanitizer. Friendly signage can even be an opportunity to deliver messages about your brand’s values and care for your community,

Remind customers the rules apply to everyone

New  Mexico currently requires masks to be worn in public. If you own or manage a business, you may have already observed that some customers resist this. Consistently insisting (politely, of course) that everyone in the store follows the rules helps communicate the fairness— and unavoidability— of your policy. Having signage may help to avoid extra conversations as well.

Be transparent about changes, challenges and delays

If your customers don’t know the rules — or the reasoning behind them — they’re less likely to follow those rules.  To cut out annoying surprises, use complete honesty and transparency with customers before they come into your store. This rule also goes for any potential delays or supply chain shortages you may be experiencing.

Train employees to be helpful and answer questions

Customers are still adjusting to the realities of post-pandemic retail shopping trips. To minimize anxiety, designate some employees to help shoppers navigate your store, in addition to posting clear signage throughout the premises. Businesses should  also tell customers how to best share their questions and concerns.

Set reasonable expectations

Even if your business has the resources to continue performing at the highest level, your vendors and suppliers may not have the same capacities. It’s important to be realistic about what’s possible and set customer expectations accordingly. It is better to under-promise and over-deliver than to inflate customer expectations and fall short. Here again, transparency helps!

Make it easy for customers to provide feedback

As the pandemic evolves, so must your business’s policies and procedures. Things may continue to change in the coming months, and while communicating these changes to your customers is essential, it’s equally critical to invite feedback.

6 Tips to Recession Proof Your Business

This year has thrown more than its share of curveballs at business owners. Changing guidelines and shifting consumer confidence make planning exceptionally challenging. The U.S. Chamber of Commerce shares these six tips to safeguard your business for potential difficulties ahead.


Embrace adaptability

The pandemic has given small businesses a crash course in adaptability. Businesses that weren’t operating online or remotely suddenly found themselves making huge changes to their business model on the fly. This willingness to pivot quickly and be flexible with your previous plans is the key to surviving the current recession.

Listen to your customers’ current needs

Understanding and serving your customers’ needs is important at any time, but it’s especially important to empathize with their current struggles and changing purchasing behaviors right now. By collecting insights from consumers and suppliers in the form of focus groups, surveys and one-on-one interviews, your business will be better able to adapt to rapidly-changing needs and behaviors.

Master the art of cash flow management

Keeping a close eye on expenses and cash flow can help you plan for your financial future and avoid overspending in certain areas of your business.

Negotiate new terms with your vendors

Vendor expenses can add up quickly, and during a financial crisis, discussing concessions or negotiating new terms with vendors and suppliers can be extremely helpful to all parties involved.

Diversify everything

Tyler Read, CEO of PTPioneer, said the best way to recession-proof your business plan is to diversify every element of your business, especially your income streams and the markets you serve. Read also recommended diversifying your staff to bring diverse perspectives to the table.

Keep investing in your business

Surviving the current economic downturn will be difficult for any business owner, but keep looking for opportunities, even when things feel bleak, said Vitale.

Despite the uncertainties, there are exciting opportunities in New Mexico to buy a business. If you’re thinking of relocating and becoming a New Mexico business owner, we can help. Learn more about businesses for sale and contact us for more information.

Who Might Buy Your Business?

When selling a business, you’ll want to consider the different buyer scenarios you’re presented carefully.  The buyer pool for most organizations can be very diverse, and different kinds of buyers pose different implications. It’s important to develop an understanding of the parties’ backgrounds and their intent to buy. Of course, will help you find the right fit, but it never hurts to be prepared. These are five of the more common types of prospective buyer profiles you may encounter.

  1. Individual Buyer

    These are individual buyers who aren’t affiliated with an external organization. This scenario can be advantageous for several reasons. For one, these parties have fewer strings attached, making them easier to work with than an existing business. They also typically have years of experience in their field. However, nearly 48% of small business buyers are also first-time buyers, according to this Market Pulse report. As a result, they may require additional training and assistance from the current business owner through the transition.

  2. Business Competitor

    Existing companies often buy out their competitors, which allows them to expand in their industry. This could be an excellent opportunity for a business owner looking to sell with little-to-no involvement following the transaction. These potential buyers usually already have an understanding of your general operations, so it takes much less time to get them up to speed. If you do pursue this arrangement, you will want to retain business broker services as many unique challenges can arise.

  3. Synergistic Buyer

    Synergistic parties are another type of buyer looking to expand their current operations. These buyers aren’t direct competitors, but more so companies in-line with your industry. They are interested in similar businesses that would be complementary to what they currently offer. A major plus of working with a synergistic buyer is that they are often more willing to pay a higher purchase price than other groups that need more financial backing. A possible disadvantage in this arrangement is that they typically don’t have the need to retain a lot of the seller’s current personnel, so downsizing is common.

  4. Financial Buyer

    Financial buyers are interested in the return they can receive by investing in a business. You may want to consider this arrangement if you are looking to maintain some involvement with your organization but do not have the capabilities, funds, or interests to continue serving as the business owner. You want to work with a business intermediary through these transactions, as they require a high level of detailed planning.

  5. Family Member

    Many small business owners choose to sell to a family member. Often, their successor is already involved with their operations and has received a great deal of training. Having this familiarity is of great benefit to a potential buyer, plus they can rely on their family member for support as time goes on. If this sounds ideal to you, our recommendation is to prepare this person as much as possible to minimize disruptions. If they aren’t ready for the responsibility, your business can suffer.

An experienced broker can help match you with the right buyer based on your personal needs. If you’re ready to sell, contact us for more information!

Happiness is a Competitive Advantage

Can positivity gain you a competitive advantage? Emphatically yes, says Harvard-trained “happiness researcher” Shawn Achor. According to Achor, author of The Happiness Advantage, “If you can raise somebody’s level of positivity in the present, then their brain experiences what we now call a happiness advantage. Your brain at positive performs significantly better than at negative, neutral, or stressed. Your intelligence rises, your creativity rises, your energy levels rise.”

A positive start to your day may increase your productivity by around 30%, says Achor. And this isn’t a bad year for some self-TLC, output-based incentives aside.

This Inc. article describes a morning routine that primes you for a constructive, positive day. For an optimal morning, Achor suggests a few deliberate minutes on gratitude, meditation, exercise, and an expression of kindness. The latter serves to boost your network as well as your mood. Specifically, try emailing or texting a different person every morning with a message of support, praise, or thankfulness. “People who do this become known as positive leaders with strong social connections–the greatest predictor of long-term happiness,” writes Inc.

By the way, New Mexico is a fabulous place to integrate morning outdoor activities into your daily life! If you’re looking to buy a business, you can sustain a high quality of life while saving money in our beautiful, affordable cities. Learn more about opportunities to buy a business in New Mexico here.



8 Tips to Foster Customer Relations and Build Loyalty

As businesses navigate reopening amidst uncertainty, customers are making their own decisions about where and how to make purchases. Fostering relationships with returning customers and rewarding customer loyalty are crucial during this time. The U.S. Chamber of Commerce shares these tips for reengaging loyal customers.

Extend reward redemption windows

A simple way to improve rapport with customers as you reopen is to extend the window in which customers can redeem rewards or points through your loyalty program. It’s important for companies to be understanding of various customer circumstances in this environment, so giving them the flexibility to come back when they are ready shows appreciation. Extending the window also means that when they do come back in, they can still use their rewards and you have more opportunities to win back consistent business.

Give special discounts and offers

One of the most important things you can do to reengage loyal customers as you reopen is to offer them discounts and deals just for them. Whether it’s a percentage off their first returning purchase, a buy-one-get-one-free offer or a similar deal, this will help make these costumers feel special and exclusive.

Improve or revamp your loyalty program

As you reopen, take a step back and think about how your loyalty program currently works to see if it fits with the current moment. There may be ways to change it to better suit pandemic-affected customers or those who have changed their shopping habits. For example, if your program usually offered discounts for certain in-store purchases, can those same benefits be extended to customers shopping online as well? Another way to improve your loyalty program could also be to simplify the sign-up process to ensure more customers can take part.

Know and understand what’s happening locally

As COVID-19 has hit communities differently around the country, it’s of great importance to focus your reopening messages based on what is happening in your local community. For example, if your region is in a certain phase of reopening, your welcome back messages may be better suited for when your area enters a specific reopening phase. If your loyal costumers see an ad welcoming them back when your business isn’t technically supposed to be open yet, it may turn them off.

Link customer credit cards to your loyalty program

With many customers moving away from cash and more people using just credit cards, you can make it extra easy for customers to gain loyalty rewards by linking their credit cards to their accounts. Not only does this make it easier for customers to collect rewards, but it also opens up the possibility to use that data to better market deals and benefits to your most loyal customers. This addition to your customer loyalty program should be optional, in case customers are concerned about privacy.

Offer priority reservations or sales

One way to make your loyal customers feel more appreciated is to offer them priority reservations, appointments or sales. This could be as simple as sending your highest-tier customer list an email a day before your normal email list with information on reservations and appointments. Another example would be to offer loyal customers the ability to buy items before you market the items as you normally would. Even if these customers don’t take you up on these offers, it could encourage them to return to your store sooner.

Scrap pre-COVID-19 marketing and advertising

If you designed marketing campaigns or advertising in early 2020 or before, think twice about using those same assets now as you try to bring customers back. Many of these ads and messages don’t account for the changes surrounding COVID-19 and showing out-of-context messaging may turn off returning customers. For example, if you had photos of large gatherings you planned to use in your summer or fall marketing, some loyal customers may feel you are not adjusting to the moment.

Understand customer challenges and meet them

One way to help bring back customers more quickly is to actually ask them what they want and what would encourage them to return. This can be as simple as emailing your top customers personally and seeing what they are most interested in buying or asking about their needs. You also could run a survey of your top-tier customers about their current buying habits to see if you need to change your inventory, modify how you offer your products or make other changes.

Moving to New Mexico

A recent Wall Street Journal article raises the questions, where do you want to live, and why? As work life shifts to remote models, the need to live near hot job markets is challenged. People are reassessing living situations and moving to places that make them happy, both for improved quality of life and ability to save money.

“At one point in April people were relocating at twice the normal pace, according to data from Cuebiq,” writes Ben Eisen.

If you are among the many people seeking a change of scene, consider New Mexico! Beautiful mountains, fresh air, and stunning skyscapes (not to mention strong economic incentives) could be calling you home.

Albuquerque was recently ranked America’s ninth most affordable city by The city’s low cost of living contributes to its also being ranked one of the top five cities in which to build wealth by pay experts

Albuquerque also ranks in the top ten large-size metro areas in the country for economic development potential, according to site selector publication Business Facilities. “‘Albuquerque has a foothold in very high-tech industries,’ including renewable energies, photonics, and information technology,’ said Business Facilities’ Editor in Chief Jack Rogers. ‘We think the up arrow is going to stay for a while.

Santa Fe was voted one of the Best Small Cities in the U.S. in Conde Nast Traveler’s Readers’ Choice Awards last year. “There is a lot of sameness in cities around the world,” says Santa Fe mayor Alan Webber. “We remain unique.”

Learn about opportunities to own a business in beautiful New Mexico. We’re here to help!





New PPP Guidelines and Deadlines

The New Mexico Economic Development Department released this statement today concerning new guidelines and deadlines for Paycheck Protection Program loans:
Economic Development Cabinet Secretary Alicia J. Keyes announced that new forgiveness and flexibility rules for the federal government’s Paycheck Protection Program (PPP) will benefit more New Mexico businesses and she is urging those who have not yet applied to take another look at the program.
With the PPP deadline for loan funding on June 30, there are just a few days left for businesses still interested to receive funding from private lenders who are partnering with the U.S. Small Business Administration (SBA).
As of this week, there is $129 billion left for PPP lending. The new forgiveness guidelines were presented by SBA leaders in New Mexico as part of an EDD webinar on June 17.
With the new PPP Flexibility Act, signed into law by President Trump on June 5, many more businesses in New Mexico who apply for forgiveness should be able to receive it. That means more of the money going to New Mexico businesses will stay in the state and not have to be repaid.
“The new guidelines mean that New Mexico businesses can reopen at their own pace and work toward a safer, stronger recovery,” Cabinet Secretary Keyes said. “The businesses can take more time to prepare and have until the end of the year hire back employees. The changes are a good thing for many small businesses in the state that are still under some health restrictions. I urge businesses who have not yet applied for PPP to take another look at this program before it closes for good on June 30.”
The biggest change allows PPP loan recipients until Dec. 31, 2020 to restore the employee headcount to pre-pandemic levels. The provision does not require hiring back a specific worker, just reaching the same headcount pre-pandemic in order to qualify for some loan forgiveness.
The new rules also reduce the percentage of PPP dollars required to be spent on payroll — to 60 percent from 75 percent. That change is particularly beneficial to galleries and specialty retailers with few employees but higher overhead in other areas such as rent, utilities, and mortgage interest.
The term for new loans is also extended from two to five years for any repayment amounts that would be due back to the lender, and the time period to use PPP money has been extended from 8 to 24 weeks.
“Small businesses are breathing a sigh of relief that they now have more time to bring back employees,” John Garcia, New Mexico SBA District Director, said on the EDD webinar.
“The changes are really important for hospitality businesses, gyms, and restaurants — many of the businesses that are still under COVID-19 restrictions,” Russell Wyrick, Executive State Director of the Small Business Development Center (SBDC) Network, said.
The SBDC centers provide guidance and technical assistance for all SBA loan services and applications in New Mexico. For more information, go to
The SBA also reopened its application portal for the Economic Injury Disaster Loan Program (EIDL), a low-interest loan up to $2 million with payback periods of 20 to 30 years.
Wyrick emphasized on the webinar there are several other SBA loan options that might work for specific circumstances and his experts are available to advise business owners and nonprofit managers at no charge.
“The new guidance for PPP loan forgiveness is a welcomed action by the SBA. Many borrowers and lenders in New Mexico have been seeking clarification and a simplified process for asking for the intended forgiveness,” Jerry C. Walker, President & CEO Independent Community Bankers Association of New Mexico, said. “This is a positive action which moves us in that direction. Taken together, these actions benefit New Mexico’s small businesses who have been recipients of PPP loans.”
Some 650 New Mexico banks, credit unions, and community lenders have been active in SBA lending over the past several months with $2.2 billion in PPP money going to 20,431 New Mexico businesses and non-profits. Nationwide, $511 billion has been distributed under PPP.
The June 30 deadline for the program is fast approaching. “People often like to wait until the last minute,” Wyrick said on the EDD webinar. “Well, this is the last minute.”
For information on PPP and all the SBA loan programs go to SBA.GOV
For information on the state assistance, including the COVID-19 Loan Guarantee Program and the No-interest LEDA loan program, go to the EDD website, GONM.BIZ
For technical help and advice on SBA programs and loan applications go to
For a list of SBA lending partners go here.
For comprehensive information from the State of New Mexico on the COVID-19 health emergency, including data, testing, economic, and food assistance, go to NEWMEXICO.GOV.

Scenario Planning for Pandemic Outcomes

“Significant uncertainty surrounds what the ‘new normal’ could look like for firms beyond the COVID-19 crisis. But scenario thinking can help organizations better anticipate and adapt to dramatic changes, increase agility and resilience, and turn uncertainty into advantage,” according to this Knowledge@Whatron article.

Scenario planning is a powerful tool for developing strategy, especially given the complex web of unknowns in which we find ourselves. It leverages the cognitive, creative power of narrative to imagine and respond to possible futures. The thought experiment yields critical analysis, important insights, and the ability to innovate and prepare for a variety of eventualities.

For scenario planning to be as useful as possible, entire teams should be engaged and invested. If delegated to a small group as a fringe project, the resultant lessons will have diminished impact, cautions this piece by business consultancy McKinsey. The exercise works best when the narratives around each scenario are all deeply developed. The more information and connections a scenario involves, the more instructive its consideration will be.

Scenarios should represent a spectrum of good and bad situations. You can think of them as laying over a graph in which the x and y axes represent best and worst case predictions for key factors. For example, take economic recovery (weak to strong) and social/consumer behavior (scared to confident). Scenarios in that case might occupy quadrants such as “struggling economy and consumers are staying home,” “economy is picking up but consumers are avoiding public spaces,” “economy is still low but people are eager for new consumer experiences,” and “businesses are bouncing back and consumers are venturing out again.” Planning deeply for each scenario allows you to create a playbook and to better recognize patterns on the horizon. This Forbes piece outlines a step-by-step guide for applying scenario planning to your business.

One of the most useful and most challenging aspects of scenario planning is thinking beyond your own expectations in order to plan more comprehensively. McKinsey shares this advice (summed up concisely in this infographic) for navigating the perils of bias.



Negotiating the Price Gap Between Buyers and Sellers

Sellers generally desire all-cash transactions; however, oftentimes partial seller financing is necessary in typical middle market company transactions.  Furthermore, sellers who demand all-cash deals typically receive a lower purchase price than they would have if the deal were structured differently.

Although buyers may be able to pay all-cash at closing, they often want to structure a deal where the seller has left some portion of the price on the table, either in the form of a note or an earnout.  Deferring some of the owner’s remuneration from the transaction will provide leverage in the event that the owner has misrepresented the business.  An earnout is a mechanism to provide payment based on future performance.  Acquirers like to suggest that, if the business is as it is represented, there should be no problem with this type of payout.  The owner’s retort is that he or she knows the business is sound under his or her management but does not know whether the buyer will be as successful in operating the business.

Moreover, the owner has taken the business risk while owning the business; why would he or she continue to be at risk with someone else at the helm?  Nevertheless, there are circumstances in which an earnout can be quite useful in recognizing full value and consummating a transaction.  For example, suppose that a company had spent three years and vast sums developing a new product and had just launched the product at the time of a sale.  A certain value could be arrived at for the current business, and an earnout could be structured to compensate the owner for the effort and expense of developing the new product if and when the sales of the new product materialize.  Under this scenario, everyone wins.

The terms of the deal are extremely important to both parties involved in the transaction.  Many times the buyers and sellers, and their advisors, are in agreement with all the terms of the transaction, except for the price.  Although the variance on price may seem to be a “deal killer,” the price gap can often be resolved so that both parties can move forward to complete the transaction.

Listed below are some suggestions on how to bridge the price gap:

  • If the real estate was originally included in the deal, the seller may choose to rent the premise to the acquirer rather than sell it outright.  This will decrease the price of the transaction by the value of the real estate.  The buyer might also choose to pay higher rent in order to decrease the “goodwill” portion of the sale.  The seller may choose to retain the title to certain machinery and equipment and lease it back to the buyer.
  • The purchaser can acquire less than 100% of the company initially and have the option to buy the remaining interest in the future.  For example, a buyer could purchase 70% of the seller’s stock with an option to acquire an additional 10% a year for three years based on a predetermined formula.  The seller will enjoy 30% of the profits plus a multiple of the earnings at the end of the period.  The buyer will be able to complete the transaction in a two-step process, making the purchase easier to accomplish.  The seller may also have a “put” which will force the buyer to purchase the remaining 30% at some future date.
  • A subsidiary can be created for the fastest growing portion of the business being acquired.  The buyer and seller can then share 50/50 in the part of the business that was “spun-off” until the original transaction is paid off.
  • A royalty can be structured based on revenue, gross margins, EBIT, or EBITDA.  This is usually easier to structure than an earnout.
  • Certain assets, such as automobiles or non-business-related real estate, can be carved out of the sale to reduce the actual purchase price.

Although the above suggestions will not solve all of the pricing gap problems, they may lead the participants in the necessary direction to resolve them.  The ability to structure successful transactions that satisfy both buyer and seller requires an immense amount of time, skill, experience, and most of all – imagination.

Copyright: Business Brokerage Press, Inc.


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