From the category archives: Certified Business Brokers News

Tips, tricks and long term strategies you should consider when buying a business in a Texas town near you.

The Non-Compete Agreement - A Negotiated Contract in a Business Sale Transaction

Non-compete agreements are typically included as part of the terms of a business sale transaction to protect the buyer from direct or indirect competition from the seller. A buyer would not want to purchase a business if the seller could relocate down the street. For this reason, buyers usually require that this threat be eliminated.

There are two main issues about which buyers and sellers should be aware. First, a non-compete agreement has limitations on time, industry, and geographic range of competition if it is to be enforceable, and, second, there are tax implications for both the buyer and the seller.

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Buying a Business - What is the Value of Goodwill for a Buyer?

Since the biggest part of the purchase price of a profitable small business is goodwill, it is important for a buyer to have knowledge and understanding of just what goodwill is and why there is value in it. Much of the value of a business is not to be found in its hard assets such as the fixtures and equipment, but in the intangibles that create the income. A simple way to describe goodwill is the difference between the current market value of the tangible assets of the business and the total value of the business.

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Due Diligence - A Must-Do Process When Buying a Business

Performing due diligence on a business being considered for purchase should be conducted much like a surgical procedure. The operation should be an organized examination of the vitals of the company.

This stage of buying a business begins once you have made your offer and the seller has accepted. A contractual agreement has been entered into between the buyer and seller outlining the price and terms of the sale. The contract is contingent upon the business passing "inspection," which is the due diligence period allotted to the buyer.

Since it is the buyer's responsibility to uncover any potential problem areas of the business, it is important to be prepared. This is the time to cut to the chase with checklist in hand to confirm all material facts of the business and validate what the seller has represented. The buyer, being the leader of the procedure, may call in specialists, such as an attorney to examine the legal aspects of the business and an accountant to scope the numbers. Depending on the size of the business, a buyer will typically have about two to four weeks to complete the process.

The following checklist represents vital aspects of a business that a buyer may wish to examine during the due diligence period. This checklist is not meant to fit all scenarios or to be all-inclusive, but to serve as a guideline.

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How is Inventory Handled in the Sale of a Small Business?

Inventory (stock held for resale) is a significant part of the tangible assets of most businesses. It is customary to include a normal inventory level in the purchase price of a business for sale that can sustain current revenues being generated by the business.

Just as tangible assets like machinery and equipment are included in the purchase price of a business for sale, the same holds true for inventory. Such assets as these are needed to generate the profit upon which the business is valued.

If a buyer is required to replenish the inventory or purchase additional equipment after purchasing the business, this additional working capital requirement would need to be taken into consideration prior to the initial valuation of the business if the sale is to be successful.

The agreement that both the buyer and seller sign into contract for the purchase of the business usually outlines the details of how inventory will be handled. The following are several aspects of inventory that are usually covered:

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Financing and Tax Implications of Selling Your Business

Taking the time to research the financing and tax implications of a sale can provide you with a strong advantage come negotiation time.

Before you can understand the importance of negotiating a final small business sale agreement, it pays to brush up on facts about how sales are financed and how proceeds are taxed. Why? Because every decision regarding the payment structure affects when and how money transfers from the buyer to the seller and how the payments are taxed.

No one is asking you to become a financing or tax pro. That's what your sale advisors do, and you'll want to call on their advice through every step from here through to the closing of your deal and the transition of your business to its new owner.

But knowing some basic information will help you understand the advice you're receiving from those who are trained and up-to-date on the legal, financial, and tax implications of small business sales.

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Thinking About Buying a Business? Do You Have the Right Attitude Genes?

Are you thinking about taking the leap of faith into being part of the self-employed -- into business ownership? If you are one of those people who have long yearned to be self-employed, to call your own shots and design your own destiny, you must break through all those yeah-buts that have been stopping you. Business ownership may not be for everyone, but it is definitely the only way to go for those who have realized the American Dream by having achieved a satisfying lifestyle through business ownership. Successful business owners share certain character traits that helped them get there. They have what it takes to overcome obstacles -- to assess situations -- a can-do attitude. First, let's discuss three types of attitudes. 1) The Self-Protective Type -- This person mostly wants to be comfortable. They work hard to avoid risk, play it safe, fly under the radar, avoid pain and seek a routine comfort level. This probably describes most people to some degree. We all feel certain levels of comfort i ...

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Buyers for Companies Outnumber Sellers 16 to 1

The World's Largest Organization of Middle Market Intermediaries The June 2012 M&A Source Conference was the place to meet fifty plus Professional Buyers with available funds to invest. It was apparent there are more funds available than there are good companies to buy. Repeat, there is no shortage of buyers with money. I would estimate there are about 16 buyers for every seller. So why aren’t buyers doing more deals? As we all know, so many companies are not as profitable as they once were, so sellers are not willing to sell at lower values right now. But another problem I learned from the Private Equity Groups (PEGs) at the Conference was that sellers are not prepared to sell. Sellers need M&A Source Intermediaries more than ever to prepare their companies for sale. Unfortunately, many sellers resist this process. Why should sellers love the M&A Process? They will make more money! In my thirty years o ...

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How Much Does Escrow Cost to Close a Business Sale?

Customarily, escrow fees are split 50/50 between the buyer and the seller and vary depending on the size of the transaction. Escrow cost is less than 1% of the purchase price of the business. However, there is a minimum fee for unusually small deals. Other charges may apply to one party or the other for specific services such as lien filings, lien searches, non-standard documents, and real estate closing documents (if property is part of the sale). The escrow agent is an independent agent who's role is to facilitate the close via a written process that is documented in an escrow agreement, or earnest money contract, that is agreed to and executed by both the seller and buyer. We all know the name of the game in business is to minimize risk; the use of an independent escrow agent substantially minimizes both the seller’s and buyer’s risk resulting from the closing process. An independent third party escrow agent works for both the Seller and the Buyer and, as such, is i ...

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Should the Owner of a Business for Sale Expect to Negotiate Price?

This is a common question asked by business owners who are thinking about putting their business on the market for sale. They want to understand the parameters of a business deal and what to expect from prospective buyers. Negotiation may seem a daunting task, but when explained in a balanced manner, negotiation should be deemed a positive approach rather than a negative one. When a serious qualified prospective buyer comes along, the negotiation strategy should be one that results in a winning deal for both the seller and the buyer. It's not about who strong-arms the other. Nor is it a game at which you either win or lose. It’s a complex process for sure. A good deal is never one-sided. Both parties should work as allies since the goal of one will achieve the goal of the other. If the parties can determine the factors that are most important to each, the price and the terms of the deal can be structured to meet those needs. The short answer to the title question is that "a ...

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Is Now a Good Time to Buy a Business?

If you buy a business in Texas, now is a good time to buy a business. With a roller-coaster stock market, a not-quite bottomed-out real estate market, and interest rates so low, there is nowhere else that will yield a higher return on your investment than in your own business. In what other investment can you receive a return of 25% and higher, and over which you have control? While many areas of the country might not be faring well, business owners in Texas reported higher sales growth than the rest of the country. Texas has consistently been one of the best economic engines in the nation and ranked the Best State For Business in 2010 and 2011. Texas is popping up on a lot of radar screens as a place to relocate or expand for businesses because of its future outlook for growth. If you are looking for stability, better predictability and control in today's economy, buying a business in Texas can offer all of these as long as you invest wisely and purchase a quality business ...

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