Typical Seller Process – 2019
Updated from earlier post. First, know what you are going to do, by Joan Sotkin. Everything we say is routine, turns out to have its own twists and turns. This is true with selling a small business as well. In this case, a small business is one that has perhaps $3,000,000 in annual sales. It may not be so small to operate and certainly requires the ingenuity of the owner. [...]
When the Seemingly Frivolous Cost Makes Sense
Martin never, ever sells anything from his upscale gallery space but refuses to close it. Why, one wonders, does he take this position. It happens that Martin’s seemingly excessive cost of rent with no payback guarantee’s his income. Want to know why? The art Martin sells is one-of-a-kind woven pieces of considerable size, some even 6’ x 10’, all made in a specific country by several different artists and in [...]
The Buyer’s Unreasonable Offer – or not
No, the buyer’s offer is not even close to the asking price – why! Sylvia has been operating her bookkeeping business as a solo-preneur for 15 years now. She works out of her home with no staff and enjoys a 95% of revenue as cash to owner, revenue less all expenses or net income. Her clients have known her for years. It seems reasonable she would be able to command [...]
Intellectual Property – Is it or is it not?
Francisco asked if his patterns, ones he designed and used in his garment-making business could be intellectual property (IP). Likely not. These are some features of IP that help to explain why not - even though Francisco had clearly designed something beautiful and something that could be reused.IP is often based on patented concepts, therefore protected from anyone else making something similar. .The patterns are not patented and likely would [...]
Buying a Small Share of a Company
Juan is considering the purchase of a 10% share of a business with a great business plan in a new industry. The founder will retain 90% ownership. Juan expects to pay 10% of the full value of the company. A full-valuation has been done by an independent valuation specialist. What risk might Juan have? He could have risk of not being able to market his small share of the business [...]
Earn outs – the case for most any industry.
Consider this: If the seller and buyer can not come to terms between one price or another, or a specific industry or company is flagging, or the business clients are tied to the seller, an earn out as a piece of the purchase price. Here Holly explains the method... What is an Earn Out Payment? by Holly Magister An Earn Out Payment is additional future compensation paid to the [...]
Why Use A Business Broker/Intermediary
This list was created as noted at the bottom and adapted to fit business intermediaries as well (see green for adaptations). The top reasons sellers hire brokers/intermediaries are these: Brokers/intermediaries know how to sell businesses; most sellers don’t 24% Seller doesn’t want to be distracted from running business 16% Confidentiality preservation and knowledge of what/when to show buyers 14% Access broker’s database of potential buyers and investors 13% Maximize price [...]
Some Nuances to Cash Flows
One of the routine evaluations of business owner's (and their consultants) relative to value to sell is cash flow. In fact it is a heart of the matter. Often the simple cash flow example is stated this way: Cash flow to a single owner is Bottom line of the tax return or related profit and loss statement Plus Non-cash items Plus Interest Plus Owner's wage Plus Other personal items not [...]
Do you want to develop more business?
One of the great ways of expanding business is through tuck ins. A tuck in is the process of one business buying another business in the same or related field and merely tucking it in, much as the tail ends of the sheet you tuck into the end of your bed to have a full set of bedding. Really. Often the acquiring business has the benefit of maintaining the new [...]
Recently peercomps.com posted a message about excess inventory - how does it influence the value of the business for sale. This is what they said and I agree: Some of you have asked in response to our #1 FAQ about inventory, how is "excess inventory" dealt with? As mentioned in our previous post, PeerComps "values" and "multiples" include normal inventory and only excess inventory can be "added on" to a [...]
Financing a Biz Purchase – Some Methods
Obviously the quickest and easiest financing of a business purchase is to reach into the pocket and draw out the cash. Really. That is easy. Most can't. Here are some other ways with many variations and combinations: Seller financing - routinely with no less than 30% down and terms of up to 10 years with an interest rate of perhaps 6 percent. The shorter the term and higher the interest [...]
I am often asked 'is it better to start a business or buy a business?' The answer is 'it depends.' It seems there are two entrepreneurial types - those that would only start a business and those who would only buy a business. There is risk and anxiety in both. They both cost money, perhaps the same. Why you ask? Well, the person who starts the business has some time [...]