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From the category archives: Certified Business Brokers News

Looking for tips and common questions that sellers should be prepared to answer before talking to a buyer.

Will Selling Your Business Get Alot Less Taxing?

The business sale process typically begins with an initial inquiry stage, during which owners try to get an idea of what their businesses are worth and whether selling makes sense. They are "sale curious" and have been thinking about it more than a time or two. When a business is sold, big or small, taxes are inevitable. Three reasons that selling a business in the Trump presidency might be beneficial...here's a look into Trump's proposed tax changes, and what they can mean for selling a business in the upcoming year. Three reasons that selling a business in the Trump presidency might be beneficial...here's a look into Trump's proposed tax changes, and what they can mean for selling a business in the upcoming year.

 

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Navigating Today's Business-For-Sale Environment

A record number of small businesses were bought and sold in America in 2016, topping 2015's totals by 8.6 percent and 2014's previous high by 4.6 percent. Will this momentum be sustained? According to Deloitte's year-end report "activity is poised to accelerate, perhaps significantly." Primary factors for the bullish outlook are stock prices at historic levels, interest rates... despite the forecast for an increase...remain near or at historic lows, an improving business environment, more qualified buyers on the market, and much improved financing options.

 

The following data shows a snapshot of 2016 market statistics for the Greater Houston Metro Area. A total of 66 U.S. metro areas were represented in a report by BizBuySell from data provided by Business Brokers. Most businesses are valued based on a multiple of adjusted earnings.

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Recasting Financials: How “Add-Backs” Impact Business Valuation

One of the most challenging aspects of valuing a small business is Recasting Financial Statements using cash flow adjustments, also known as “add-backs”.

Larger businesses tend to have CPA-reviewed or even audited statements and adjustments may be limited to officer compensation or bonuses.

However, for smaller businesses, it’s no secret that owners try to limit their tax liability by expensing personal or “non-operational” items through the business. The concern for outside parties is typically twofold: (1) will a lender accept this and (2) can it be verified?

Add-back acceptance is a grey area, most likely falling under prudent lender policy. Although there is no right or wrong answer, I would ask the following questions to help determine if the addback is reasonable from a financial point of view:

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The 10 I-Do’s In Prepping Your Business To Go To Market

Are you a business owner at that stage in your life where you are contemplating the potential sale of your company? Undoubtedly you have thought about selling a time or two and truth be told, 100% of all business owners have from time to time. It's perfectly normal to question why, when or how to sell your business. The main key to a successful sale is preparation. Keep in mind that whatever you put into the process is what you will get out of it.

 

Understanding the selling process and being prepared are the key indicators that will establish the tone of selling your business and help you be more comfortable when you are ready. The selling process is important and requires a huge amount of commitment. Selling your business needs to be a calculated decision based on many actors.

 

Therefore, when you are ready, recognizing "The 10 Do's of selling your Business" will position your company at the right place and help you understand the ins and outs of the process a bit better.

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Initial Common Questions Buyers Ask Sellers When Looking For A Business To Acquire

When looking for a business to purchase, most prospective buyers have an initial list of qualifying questions they ask an owner of a business they are interested in. In addition to this baseline information, buyers may use the first couple of meetings or calls to get a clearer understanding of the business and to assess its risks and upside aspects.

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Why Deals Fall Apart — Loss Of Momentum

Deals fall apart for many reasons – some reasonable, others unreasonable.

For example:

  • The seller doesn’t have all his financials up to date.
  • The seller doesn’t have his legal/environmental/administrative affairs up to date.
  • The buyer can’t come up with the necessary financing.
  • The well known “surprise” surfaces causing the deal to fall apart.

The list could go on and on and this subject has been covered many times. However, there are more hidden reasons that threaten to end a deal usually half to three-quarters of the way to closing. These hidden reasons silently lead to a lack of or loss of momentum.

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The 3 Ways To Negotiate

There are three major negotiation methods.

1. Take it or leave it. A buyer makes an offer or a seller makes a counter-offer – both sides can let the “chips fall where they may.”

2. Split the difference. The buyer and seller, one or the other, or both, decide to split the difference between what the buyer is willing to offer and what the seller is willing to accept. A real oversimplification, but often used.

3. This for that. Both buyer and seller have to find out what is important to each.  So many of these important areas are non-monetary and involve personal things such as allowing the owner’s son to continue employment with the firm.  The buyer may want to move the business.

There is an old adage that advises, “Never negotiate your own deal!”

The first thing both sides have to decide on is who will represent them.  Will they have their attorney, their intermediary or will they go it alone?  Intermediaries are a good choice for a seller.  They have done it before, are good advocates for their side and they understand the company and the seller.

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What Makes Your Company Unique?

There are unique attributes of a company that make it more attractive to a possible acquirer and/or more valuable. Certainly, the numbers are important, but potential buyers will also look beyond them. Factors that make your company special or unique can often not only make the difference in a possible sale or merger, but also can dramatically increase value. Review the following to see if any of them apply to your company and if they are transferable to new ownership.

 

Brand Name or Identity

 

Do any of your products have a well recognizable name? It doesn’t have to be Kleenex or Coke, but a name that might be well known in a specific geographic region, or a name that is identified with a specific product. A product with a unique appearance, taste, or image is also a big plus. For example, Cape Cod Potato Chips have a unique regional identity, and also a distinctive taste. Both factors are big pluses when it comes time to sell.

 

Dominant Market Position

 

A company doesn’t have to be a Fortune 500 firm to have a dominant position in the market place. Being the major player in a niche market is a dominant position. Possible purchasers and acquirers, such as buy-out groups, look to the major players in a particular industry regardless of how small it is.

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Get Out Of Town: Increase The Value Of Your Business

Vacation - it's often an elusive concept for the owners of small businesses. Even when owners do take time off, chances are they're still checking in constantly, which has become increasingly easy to do in this age of the smartphone and ever-omnipresent Internet connectivity. The ironic thing is that this constant owner involvement can actually be detrimental to the value of the business from the perspective of potential buyers.

 
An owner-driven business is not an attractive asset in a buyer's eyes. An in-place team that can provide continuity and assist in the growth of the business under new ownership IS. An enterprise with infrastructure guiding its revenue-generating capacity is much more appealing than one with a singular person holding the key to the revenue engine. It is important to have systems running the business and an experienced staff running those systems.

If you want to improve your business - plan an extended vacation! Your staff and family will be glad! It can help you see where the gaps are and where improvements need to be made in order to decrease owner dependence and increase business efficiencies and value.

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What Drives The Value of a Restaurant?

The valuation of a restaurant is much like any other business valuation. But, there are certain factors unique to the restaurant industry. The following are key elements that impact the valuation of food and beverage businesses. The list is not in any specific order.

1. Location, Location, Location

A high traffic, high demand, prime location with booming business in the area and a mid-to-high income population can add significant value. Parking, signage, and access are also important. Keep in mind, however, that a good location is not a stand-alone secret to success. Location Location Location must be followed up with Execution Execution Execution! Good management is key. Over the past 40 years we have sold some restaurants and fast food places as many as four times. With good management, the same location that was once a loser can be turned into a winner by good management -- and vice versa.

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