The obvious answer is probably that most people are looking to buy a business that makes a lot of money. But the real answers may surprise you. Here is a list of just a few that buyers have mentioned: •    Pride of ownership •    A business that looks like fun to own and operate •    Happy employees •    Financial records that make sense •    Good growth prospects •    A well-known or popular business •    A good track record •    A great location •    A seller who is willing to finance the sale •    A reasonable price Certainly, a buyer wants to make money when buying a business, but there is more involved, as the list above indicates. If you’re even thinking about selling, a visit with a business brokerage professional will pay big dividends by finding out what local business buyers are really looking for. … [Read more...]

A recent survey asked leading business brokers and intermediaries: What is the seller’s biggest obstacle to selling the business? In other words, why do business owners who are considering selling fail to follow through? Seller’s Biggest Obstacle to Selling The answers to this question were revealing, fascinating and important for prospective sellers to understand and consider prior to placing their business on the market. The biggest reason was one that most people would guess—price. Here are a few explanations that sellers offered concerning price: •    Price—net amount after tax proceeds •    Never enough dollar value in the deal, after taxes, lawyers, accountants, brokers •    Price justification •    Price versus offer •    They don’t want to accept the market price of the business •    Price does not meet owner’s retirement needs •    Understanding that valuation is based on historical cash flow rather than “potential” cash flow •    Perception of value of their … [Read more...]

You’re considering selling your business.  Your accountant or financial advisor has reviewed your profit and loss statement, and told you what he or she thinks your business is worth. Is this a valid figure? Do the numbers reflect the real value of your business? Below are some other factors to consider regarding the true value of your business. These factors may not have a specific dollar amount attached to them, but they certainly influence value and the price a business may sell for. •    Are you serious about selling, and is it the right time? (Use this only if selling is the reason for the valuing.) •    What are the two or three biggest obstacles to growing the business? •    Why is your business different than the competition? •    If you don’t own the real estate, what is the status of your lease? •    What is the short-term and long-term trend of your business and the industry? •    Does, or can, international competition impact your business? •    Why do customers … [Read more...]

An old saying in negotiating the sale of a business goes like this: The buyer says to the seller, “You name the price, and I get to name the terms.” Another saying used to explain the actual value of the term full price: “If we could find you a business that nets you $250,000 a year after debt service, and you could buy it for $100 down, would you really care what the full price was?” It seems that everyone is concerned only about full price. And yet, full price is just part of the equation. If a seller is willing to accept a relatively small down payment and carry the balance, a higher full price can be achieved. On the other hand, the more cash the seller wants up front, the lower the full price. If the seller demands all cash, barring some form of outside financing, full price lowers – and, in most cases, the chance of selling decreases as well. Even in cases where outside financing is used, such as through SBA, etc., the lender will do everything possible to ensure that the … [Read more...]

Thinking About Selling? Here are some tasks business owners should consider completing before going to market to help their businesses sell. Remove any items not included in the sale. That family heirloom portrait behind the counter of Grandfather William, founder of the business, should be removed. Remove or repair any non-functioning equipment. Prepare an operations manual to show a new owner all the functions of the business, how things are done, the major customers and suppliers, samples of advertising, and any other information that would help a new owner manage and operate the business. Take care of any outstanding bills and resolve any legal, tax, or governmental issues. Bring your financial statements up to date, and have your accounting professional prepare them for a buyer’s inspection. Clean up the business inside and out. Fill the shelves, clean up the inventory, and paint the interior if necessary. … [Read more...]

Many business owners probably have asked themselves this question. There are many unique and different types of business. Some fill very small niches while others have carved out a unique product or service while still others require a unique or very specialized talent, knowledge or experience. An owner of a “unique” or at least unusual business may feel that there is no one out there who would buy it. Almost all businesses are saleable, but the big question is: Is the seller willing to sell? Because of Internet marketing and other new technologies, business brokerage professionals know how to reach potential buyers world-wide. Somewhere there is a buyer for almost every business. Locating the right buyer is the job of the business broker professional, who recognizes that the seller’s willingness to sell is the key. Why is a seller selling; what is important and what is not. If a business owner just wants to see what the market might pay for the business; or hopes to “make a killing” … [Read more...]

This is often a prospective buyer’s first response when given the price of a seller’s business. This is especially true today when many excellent and profitable businesses have few hard or physical assets. For years, buyers, and even business appraisers, have called the difference between the actual physical assets and the asking price as “blue sky.” Goodwill has often been a prime force behind the blue sky concept, and it is one of the reasons a potential buyer might feel that the seller is asking an “arm and a leg” for the business. Goodwill has been called many things – very few of them good. However, today’s goodwill is more than just the hard work and effort a business owner has put into building the business. The Web site name alone may be worth a lot of money. Think “Google,” which by now may have achieved the same name recognition as Kleenex. If another search engine company could use that name, the business could be worth millions – even billions. The technology behind the … [Read more...]

How does someone else, for example, a potential buyer, rate your business on the issues listed below?   Rate your business and yourself on the time-honored “A” to “F” scale.  You can even use a plus or minus.  What’s your average? Too many business owners operate on gut feel or “from the heart.”  Nothing wrong with that; many people start or buy their own business and operate it successfully with nothing more tangible than this kind of factor. But, every now and then, perhaps once a year, seize the moment and take a more realistic look at your business.  Grade yourself, using the following business report card as yardstick: 1.    Difficulty or the lack of competitive entry 2.    Stature of the business or product . . . exciting/glamorous 3.    Perceived level of required expertise – or licensing 4.    Ability of the business to secure funding -- seller carry-back 5.    Volatility of business/customer loyalty 6.    Diversity of customers and/or suppliers. Exclusives? 7.    Length of … [Read more...]

One of the major advantages of small and mid-sized businesses is that it is much easier to make changes with this category of business than it is with the larger kind. The larger company can become so  mired in bureaucracy that it can’t turn on a dollar much less on a dime.  Changes can be a new product or service, expansion into new markets or focusing on existing markets, or a change in direction or positioning. If your business is small or mid-sized, this might be the time to consider whether change, no matter how minor, might  increase business.  For example, if you’re in a retail business, would a new product or product line increase sales without increasing costs?  If you’re in a service business, are there some new services that can be offered, or existing ones expanded?  It is better to attempt a change rather than not to try one, because in the small and mid-sized business, strategies for change usually can be withdrawn or modified without inordinate damage to the existing … [Read more...]

When the time comes to sell your business, what makes up the selling price. What is it that you are selling and the buyer is buying? It is important that the selling price be defined in such a way to avoid any confusion. Below you will find some sample wording used by business intermediaries to define the selling price. Keep in mind that this is sample wording only and is presented here merely for informational purposes. The term “selling price” shall include (a) the selling price of the assets acquired plus any obligations assumed by the purchaser, (b) if the sale becomes one of stock, then the selling price will be all of the assets plus all of the liabilities of the corporation plus the value of any covenants not to compete, employment and/or consulting agreements plus the value of any allocations for goodwill and/or intangible assets. The total sale price shall consist of all consideration received by the owner and/or the company including the sum of the following: (a)    The … [Read more...]