Eric Mendelsohn with Transworld Business Advisors

Intro: [00:00:07] Broadcasting live from the Business RadioX studios in Atlanta, Georgia. It’s time for Buy a Business Near Me, brought to you by the Business RadioX Ambassador Program, helping business brokers sell more local businesses. Now here’s your host.

Stone Payton: [00:00:32] Welcome to another exciting and informative edition of Buy a Business Near Me. Stone Payton here with you this afternoon. You guys are in for a real treat. Please join me in welcoming to the broadcast with Transworld Business Advisors. Mr. Eric Mendelsohn Good afternoon, sir.

Eric Mendelsohn: [00:00:52] Thank you, Stone. Pleasure to be here.

Stone Payton: [00:00:54] Well, we’re glad to have you on the show. Man where are you calling in from today?

Eric Mendelsohn: [00:00:58] I am in the Big Apple, New York City.

Stone Payton: [00:01:02] All right. So tell us a little bit before we dive into deep, can you give us sort of a State of the Union man? What’s what’s what’s the arena like right now?

Eric Mendelsohn: [00:01:13] Yeah. So I am a business broker with travel business advisors. We are the largest business brokerage, so we’ve access to a lot of great data out there. What’s going on in the current market as far as the main street and lower mid-market. So we’re seeing a lot of activity right now out there. It’s busy. I know the amount of closings we’re having as a firm is up by over 33% compared to this time last year. We have a lot of deals right now that are going into contract. A lot of intense out there. You know, last year was also a very good year for activity. But even more so based upon where I am here in the New York City region, we were certainly impacted very hard by COVID and by the crime wave last winter. And so that’s certainly took a bite out of the business sales market. But now, for the first time in a long time, we seem to be past COVID, which is great, and businesses are really selling and people are getting turned off to real estate due to the high rates and they want to buy business instead. So it’s it’s a great time for someone to want to sell their business.

Stone Payton: [00:02:37] So is getting ready to sell a business or selling a business getting any easier? And maybe I guess that sort of tells you that that in my mind, there’s a lot to it.

Eric Mendelsohn: [00:02:50] Right? Well, the word easier, I think that that’s not maybe the best word for it. I think that if a business owner is prepared and well educated, we have a lot of data about exactly where a business should be priced. And if you price a well, you price it to be sold in a business where there’s lots of buyers for for example, carwash is a very hot liquor. Stores are always very hot and they do manufacturing. It’s a hot business. Anything medical related. So you price a business one of those industries, well, it’s going to sell. And so it’s just letting the business owner know in education about where exactly their business should be priced in order for it to sell.

Stone Payton: [00:03:44] So what’s your back story, man? How did you get into this line of work?

Eric Mendelsohn: [00:03:48] Yes. So I mean, that’s a good question. It’s a bit of a long story, but I’ll give you the short answer. So my first career wasn’t in financial services. I was working for an investment bank, and after that I went back to graduate school, got my MBA, and then I came out of graduate school and I just couldn’t find a job. It was after the 2008 recession, and so I started doing residential real estate part time, and I saw that I liked it. I saw that I enjoyed sales, and I started doing that full time and really being here in Manhattan, New York City, you either learn the business very fast or you don’t. And you’re getting such high pass fail rate of people who can actually make it and make it a career. And so for nine years straight, I did residential real estate full time and that really gave me all that sell expertise, really honed my skills in marketing and sales and in 2018, 2019 start to become a very tough real estate market. And so I was just trying to look for other opportunities to make myself more diverse. And I heard the term business broker and I’m like, What’s that? And the more I heard about it, the more I thought that, Wow, this is something I can really excel at. Because in order to be successful at this, you need to do two things. First of all, be very good at sales. Second thing, I’m have very good business financial acumen, which is certainly what I have for my first career. So if you have both of those things, I think in business sales you’ll be a home run. And I just decided to branch out a couple of years ago and I sold this company called Transworld, and they were the biggest business, biggest business brokerage out there. And I said, All right, let me give them a try. And I was also very pleased about the education they give to new agents. So that’s what made me start this career.

Stone Payton: [00:05:47] All right. So walk us through the process, if you would. Broad strokes any way, and I’ll give you an example or you can pick a different one. But I own 40% of a company, the business radio network. My business partner owns the other 60%. If we were to reach out to you and we said, Hey, we’re ready to exit on this thing, what are what are some major steps in the in the process that you would kind of help us walk through?

Eric Mendelsohn: [00:06:13] Sure. So there are, of course, a number of areas, I think, that business owners make and then rehearse them when it comes time for a sale. First of all, if the business is really the owner, maybe you have your name attached to the business, could be maybe Smith Burgers and you know, you’re the you’re in charge of the burger shop, for example. It really hurts the sale because buyers say, Oh, how can I replicate what that owner is doing? And they say, well, there’s no way possible. And then if a buyer feels that, they’re going to say, Well, the business is not worth the amount of money, you’re asking for it. So it’s as I say, a good rule of thumb is what happens to the business if you’re away for a week, if you’re work for two weeks, does the business crumble? Do you have to be on your phone all day or can the business run effectively with you away? If it can, then that’s great. So ideally you want to really have some sort of manager in place. There was going to stay after the sale. That really adds comfort to buyers. So that’s the first major step that I would take. The second major step is you want to have really great books and records. That means all the cash is on the books. That means you’re documenting everything. So a lot of time. A business owner will charge personal expenses to the business. It’s called an add back. So basically we add that back because basically the reason why business owners do that is they want to they want to maximize their deductions on their on their return. So. You want to make sure that those those are valid add backs when it comes up to sell the business. So you want to have everything documented. So maybe you charge yourself into the business, maybe you charge some parking or tolls or gas or your health insurance. So all of that you want to document. So it’s very important to have really great documentation.

Stone Payton: [00:08:28] Well, that first thing you said about being away in the business still run effectively. Those are very encouraging words for me because it seems like every time I step away, everything just clicks. It does better. I should go on vacation more often, but I know it makes a lot of sense. Benefits. If it’s so heavily dependent on the individual, then yeah, it makes sense that that would definitely impact the market value. I think I know the answer to this, but I’m going to ask it anyway. Do you find that at least initially, often business owners have an inflated sense of the actual market value of their enterprise?

Eric Mendelsohn: [00:09:06] Yes. So great question. And I would say yes, I would say pretty much 90% of business owners have that perception. And that is why you see the results that basically less than one in five businesses posted for sale nationally actually sell. And that’s staggering. I think it’s about 17% is the official number that I’ve seen quoted. And the reason for that is because whether it is trying to sell the business on their own or they hire a broker, if they’re hiring a broker, the broker is not giving them the right information, the right education about where the business should be sold. And that’s the thing that I do that I bring to the table. And that’s why we sell businesses and get them sold. Not just list is because we have those numbers and that’s what we present to a seller when we are going to beat them.

Stone Payton: [00:10:05] So what I’m envisioning here, and maybe you have it all in house, or maybe you just have this really tight network of best in class advisors. But I’m envisioning you as almost like the quarterback of my cell team. So like you would bring in someone that can do valuation, the CPA type person, is that is that accurate or is it how does that piece were?

Eric Mendelsohn: [00:10:27] Yes. So I do refer to myself as the broker, as being the quarterback of the deal. I need to certainly read the deal to where it needs to go. We need to be the seller to where they want to go. And we need to basically be the CPA or the attorney to make sure get everyone onto the same page when obstacles happen or could be. Also, the lender to lenders are obviously involved in a lot of our deals also. So that’s kind of how we kind of lead read the deal. But yes, we are, I would say essentially the quarterback of the transaction.

Stone Payton: [00:11:05] So yeah, talk a little bit about not just lending but this, this, this whole idea of structuring the deal because I’m beginning to learn because I’ve now done a few of these interviews with people in your general space. It’s you can get kind of creative. There’s there’s more than one way to structure a deal, right?

Eric Mendelsohn: [00:11:25] Correct. So a few ways a deal gets done. First of all, a deal can get done all cash. Obviously, sellers love that. But actually very few of our deals get done on cash because less buyers can afford to pay all cash. The second way I would say the most common way we do deals is with seller financing. So essentially what that is, is the seller becomes the bank. So basically, for example, let’s say the business saw price is $1,000,000 buyer will put down, possibly half down and then half in seller financing. So that gets paid back usually over a few years with interest. And so there are some tax benefits to that, too, as far as deferring gains and buyers like that, because then the seller stays involved in the business. They want to see the seller succeed because they have payments coming to them every month. So buyers really do like it and it is easier to get done. Then the other alternative, which is bank financing, so that would be the SBA financing, which is of course common. And in this case the seller gets paid in full at the closing, but it just takes a while to get done. And banks obviously are getting, I think, a little more conservative as far as their lending, because obviously there’s talk about maybe we’re headed into a recession. So so certainly bank lending for the banks can certainly bring some complexities into it. So that’s why more of our deals get done with seller financing than with the other options.

Stone Payton: [00:13:10] So if you’re a layperson like me and candidly probably a lot of our listeners, how would you shop for a business broker? What are the characteristics you’re looking for? What kind of questions should should we be asking?

Eric Mendelsohn: [00:13:26] Yes. So great question. So first of all, what is their marketing plan? Where do they advertise which which website? So there’s a number of websites on there that are out there that are online, that post business listings. That’s the first thing. Second thing, what are you going to do to capture buyers who are not on their what’s your marketing plan? So that’s the second thing. Third thing, how big is your firm and do you Colebrook with other agents. So Colebrook is a real estate term and means do you work with buyers agents. So unfortunately business brokerage. I come from a real I come from real estate and real estate. There’s you, Colebrook. You belong to these organizations, you know, like like National Association of Realtors or your local real estate board. And so you Colebrook with other brokers and this is brokerage, unfortunately, it’s like the wild, wild west where there is no brokerage in many, many states. So most of our competitors do not go broke, do not book with buyer’s agents. They only do things in the house. And so if when a seller is listing their business with an agent who does not. Colebrook They’re really hurting themselves and the amount of money they can get for the business at Transworld. This is why I joined Transworld is because Transworld does go broke. We work with any agents, whether it be externally or internally and locally. Here in New York we have a nice team of about 20 agents. So not only is someone hiring me, but they’re hiring our whole entire team. And that’s super, super important. It makes us different.

Stone Payton: [00:15:09] So what’s the more challenging or is it just two sides of the same coin? Is it is it building relationships with with buyers or or finding sellers or is it just to. Yeah. What is one more challenging than the other?

Eric Mendelsohn: [00:15:25] Well, I think it’s a combination of both. I think the first thing is, obviously, there’s good sellers and there’s bad sellers. So bad sellers certainly are not realistic with the price. This inflated value are not responsive. When you’re working with a seller, your team, you know, unlike real estate where you just show up property for the most part and you just walk in and and there’s very few there’s very few items that you actually need the help of the seller and business sales. There’s so much information, there’s a lot of specific questions that only the seller would know about the business. So you really need a seller who’s going to be responsive because if not, then buyers lost interest if they don’t hear back within a fast period. But also you do want to find good buyers. And so that’s why it’s important to have a broker who is going to platform was going to list the business under a different platform where capturing a lot of different buyers depending upon the price of the business.

Stone Payton: [00:16:29] And does it largely localize like you do in most of your work in the New York area? Or are you subject to to help broker a deal in Austin, Texas? What’s that aspect of the business look like?

Eric Mendelsohn: [00:16:41] A good question. I can certainly help anywhere. That’s I mean, whether it’s anywhere across the nation, I do concentrate on businesses in New York City metropolitan area, whether that be New York, New Jersey, Connecticut. But I could help anywhere. So much of what we’re doing these days is over. Is over. Zoom anyway and zoom in the phone. Yeah. So it’s very little these days. We’re doing in person anyway and certainly we always want to maintain the confidentiality of the business. This is very important to us. So I’m not going to be walking in there every day with bars anyway because then they close it or No, something’s up. So. So I could help anywhere. And we do have offices, of course, all around the nation. So if it was a business that required more in-person hand-holding, then certainly that’s something obviously we can do and we have great resources here at Transworld.

Stone Payton: [00:17:41] Well, I suspect just the fact that you guys are so well known and that you do good work is probably your best sales and marketing tool. But I’m always interested how does the whole sales and marketing thing work for you guys? At the moment? I’m not talking about helping me sell my business, but I’m talking about you. Like, how do you get to go to market and have a conversations with somebody like me and lead, you know, a few years from now when we’re ready.

Eric Mendelsohn: [00:18:09] Right? So, you know, I always say it’s never too early to have a conversation and to talk to any business owner out there saying, oh, maybe I want to sell a couple of years. Well, you know, the right time to really prepare for the sale is now, not in three years. If you start running the business like you’re selling the business tomorrow, I guarantee your business is going to do better because you’re going to do the right things. You’re going to invest in the right in in the right approach. You’re going to make sure your reviews on social media are great. You’re going to make sure your website looks good. So these are all things that can help your business right now and certainly down the line that buyers are going to want to see. So I think this is very important to really contact someone like myself and see what it is that you can do better.

Stone Payton: [00:18:58] What a great point. I mean. Yeah, I mean, just beginning to work with a business broker just to help you get your ducks in a row. I mean, that’s just that’s just good mojo. That’s a that’s a technical term. You’re welcome to borrow if you want, Eric. But no, that makes all the sense in the world. Hey, listen, before we wrap, I’d love to leave our listeners with a few pro tips, a few things, actionable things. I mean, number one, pro tip, reach out and talk to Eric if you want to have a conversation. But maybe some things they can begin thinking about reading and I don’t know, buyers, sellers, whatever you think would be helpful. But I’d love to leave him with with a handful of pro tips if we could.

Eric Mendelsohn: [00:19:39] Right. So as far as the number tips to both buyers and sellers, as I just said to a seller, one obviously have an agent who’s educated, who who has comps, who shows up, prepare, you know, and that’s also and there’s also wanting to push back to you on on the price and listen to an honest assessment of where the value for your business should be. Because like I said, the odds are that your business will not sell to buyers. I think it’s important to understand the process, to understand the timeline for buying a business, how that how that works. If you’ve never bought a business before, it can be very stressful. So it’s important to have someone on your side to have have a broker on your side. Certainly selling a business is similar to selling a. Selling real estate and buying real estate is similar in to the business sells part of it and that there’s no charge for my services for I’m a buyer so I never listings at Transworld. So that’s why I would suggest to certainly use a broker like myself.

Stone Payton: [00:20:51] All right. So if someone wants to reach out and have a conversation with you or someone on your team, ideally so that they can avoid the 80% of businesses that apparently don’t sell and would like to learn more about these topics. What’s the best way for them to connect with you? Whatever you think is appropriate? Email, LinkedIn website. I just want to make sure that they can get connected with you to further this conversation.

Eric Mendelsohn: [00:21:15] Yeah. Thank you. So so my LinkedIn is Eric Mendelson, me and DDL. So look me up on LinkedIn also Eric Mendelson on LinkedIn. On Instagram or my cell phone. 5168403516. Feel free to get in call.

Stone Payton: [00:21:35] Well, Eric, thanks for being on the show. Man, this has been very informative. A pieces of it. It’s kind of sobering. That 17% statistic was a little bit sobering. But, you know, one more reason to seek out someone with specialized knowledge and expertise to to coach you through this, guys. Eric, thanks so much for investing the time to to visit with us this afternoon.

Eric Mendelsohn: [00:21:59] Thank you, Stone. Really appreciate the call.

Stone Payton: [00:22:04] Absolutely. All right. This is Stone Payton for our guest today, Eric Mendelson with Trans World Business Advisors and everyone here at the Business Radio X family saying we’ll see you next time on Buy a Business Near Me.