Here are some of our most frequently asked questions and answers. Don’t see your question here? Contact us for a no-obligation consultation.
FAQ – Valuation
Q: How do I know the value of my business or a business I want to buy?
A: Just ask!
Don’t merely assume your business is worth a ton – or very little. And don’t buy a business without understanding its value and how that number was figured. A business for sale is worth only what a willing buyer will pay.
Q: What methods are used to value businesses?
A: Whether you’re a buyer or seller, know these about these methods.
* Seller’s discretionary earnings multiple
* A percentage of annual revenue
For most businesses, these two methods of valuing a business are most common. However, seller’s discretionary earnings (aka cash flow to owner) is more widely used because it actually reflects the performance of the business from an owner’s perspective. If sales don’t result in owner’s income, how can the buyer be confident of their ability to earn an income for themselves? Sometimes rules of thumb can be applied to resolve this dilemma. And, specific balance sheet items can impact value –furniture, fixtures, equipment, inventory, etc. Whatever method you use, be sure a professional has helped you determine whether this method is the best for the type of business.
Q: How do I maximize my business’s value before sale?
A: If you want to maximize your business value, start now.
* Keep accurate records – financial, inventory, taxes, etc.
* Report all income
* Manage costs for high quality and low cost
* Be well managed throughout
* Always be working to define the next generation and take it there
FAQ – Buying
Q: Is buying a business right for me?
A: Know yourself, your interests and capabilities to be an entrepreneur first, and succeed with this business, second.
Not everyone is cut out to run his or her own business. People who are successful employees may not succeed or be happy as a business owner. Plus, owners take on tremendous financial and legal liabilities that employees don’t have. And if you hate widgets you aren’t likely to enjoy owning a business that makes widgets.
Q: I’m thinking of buying a business. Where do I start?
A: Know what is critical to buying a business before you begin looking.
It is easy to be enchanted with a business for sale in New Mexico. Knowing your criteria for making a selection is critical. Ask yourself:
* Will I enjoy and have the skills necessary to ensure the success of the business?
* Is it a business I can be proud of and want to work at?
* Is the business financially viable, now and looking forward?
* Can I see the next generation of the business, knowing where I might take it?
* Will the business support the work-life balance I want?
Q: How do I pay for a business?
A: Choose your options carefully.
It is very common for a number of financial sources to be put together to buy a business. For your own contribution, keep it reasonable. Leave yourself with a nest egg and a sum of money you might tap for the unforeseen. The current owner (the seller) could be a wise option for financing. Having their vested interest in the future performance of the company ensures they properly turn the business over to you and meet any commitments to help. They are often a less expensive financing means, too. Professional lenders such as banks and venture capitalists are additional sources for financing, with venture capitalists wanting more interest, faster return, and more input to the company operation. While venture capitalists may seem controlling, when wisely selected they can bring a big asset to achieving success.
Q: Should I buy a business from someone who is willing to sign a non-compete?
Without their non-compete, the selling business owner can totally eradicate your newly purchased livelihood by opening up shop next door. Have your legal advisor ensure a non-complete is a part of the agreements you sign. Length of non-compete, business scope, and geography are all critical components of non-competes.
Q: What is due diligence and when does it