Biz Broker Florida: Business Valuation

Showing posts with label Business Valuation. Show all posts

Wednesday, November 14, 2012

Basic Steps When Buying A Business

Basic Steps When Buying A Business

Buying a business is no easy task and never has been, so have a plan is crucial to a successful outcome. Here are some basic steps that should be core to the plan you develop.

Do your research. Many sectors have become strapped for cash in recent years, but some have actually benefited from the economy being turned on its head. The construction sector, for example, took a nose dive initially, but savvy business buyers are now finding some bargains and turning their fortunes around. Take some time to do some research and find out what areas of business interest you and offer a decent level of potential profit
Monitor a few possible acquisitions. Don't rush into things, have a look around the market at some businesses that might suit you and check out their prices. Work out what some reasonable expectations in terms of turnover and costs and make sure you have a good broad overview of the market.
Organize your affairs. Once you know how much you're going to invest in the new business it's time to triple check your own finances and paperwork to ensure that you can make a move when the right opportunity crops up. This involves everything from securing finance to having a business proposition in place.
Narrow your search. Start thinking seriously and close your search down to look for the right business for you.
Do the deal. Signing on the dotted line is the exciting part, but don't neglect things like diligence when you come to put a bid in for a business. This is your last chance to ensure this is the business for you, so don't be shy when it comes to asking questions about financial details and accounts. You will also need to consider handover arrangements at this point and think about whether or not you would like the seller to remain involved in the business in some capacity.

For a complimentary consultation:
Contact Cecil Williams (cecil@bizbrokerflorida.com) or call at 888-925-5055 ext.206. Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com Also, visit our Florida Business Exchange website at www.fbxbrokers.com

Wednesday, November 7, 2012

Rules When Buying A Business

Ten Rules When Buying a Business

by Calia Roberts,

With the proper research, buying an existing business can be profitable.

Purchasing an existing business is often more attractive to entrepreneurs than building a business from nothing, as taking over an existing business can be much easier than growing a business from the ground up. While buying an existing business can be a bargain, there are some rules to follow to ensure you are not investing in more problems than profit.

Determine Expectations

Determine what your expectations are from the business, then analyze if the business is able to fit your expectations. This first step will avoid many headaches that come with owning the wrong business for your needs in the future.

Reasons for Selling the Business

Find out why the owner is selling the business. Reasons such as retirement are common and understandable, but reasons such as the business is too difficult to run or has a low return on investment typically indicate future problems.

Making the Transition

Arrange to have the owner stay on for a short time after the sale to make the transition between owners easier. This is especially important for sales-driven businesses, as the previous owner can familiarize the customers with the transition, which is beneficial to avoid losing sales.

Find Out the Problems

Research the business thoroughly to find out the problems of the business. While all businesses have problems, some are bigger and more costly than others. Determining the problems will help you determine the viability of the sale. Avoid purchasing businesses that owners claim are problem-free, as this is a definite indicator of future issues.

Determine Growth Potential

The goal of purchasing a business is to make that business a success and see a return on your investment. Determine the growth potential of the business by analyzing all relevant information, including its track record, to determine if the business has potential for success going forward.

Examine Documents

Become informed about the business by requesting to examine all pertinent documents, such as financial statements, partnership agreements, contracts, leases and tax returns. This information allows you to determine the obligations and the current success of the business.

Negotiate

When purchasing a business, it is essential to negotiate during every aspect of the purchasing process. Successful negotiating gives you the best start and the best options in the future. Enter the purchasing process with the mindset that everything is open to negotiation.

Evaluate the Location

Potential owners interested in a brick-and-mortar business must evaluate the location prior to purchasing. The location of a business is crucial to the success of the business, especially when relying on foot traffic for sales. Research the location and the surrounding area to become informed.

Employees

Before purchasing, determine if the best business move is to keep the existing employees or to hire your own employees after completing the purchase. If you intend to keep the existing employees, you become liable as an employer for all relevant obligations, such as vacation pay, insurance premiums and salary.

Have an Exit Strategy

Always have an exit strategy in place for when you are ready to move on to other ventures. Before purchasing, determine if the business will be difficult to sell. If the business has been on the market for a while, you might be purchasing the proverbial millstone around your neck.

Wednesday, October 31, 2012

Buying A Business - Start By Examining Yourself

Ask yourself these eight (8) questions before making an offer to buy a business.....

1. What do you want from being in business?

For lifestyle (to work fewer than 40 hours per week, with the freedom to go on holidays whenever you choose)?
To make a profit by building the business up (increasing sales)?
To generate more cash-flow than a 9-to-5 job?

Whatever reasons are important under this question, if your reasons are not listed on your list – don’t buy the business.

2. Why am I buying this particular business?

It’s in a prime location.
It has a massive customer database which is not being used to its full potential.
You’ve created a specific plan to massively grow the sales revenue using knowledge you’ve accumulated from being an manager in a similar business, or from a previous business(es) owned.
The business has ‘something’ (Intellectual property, branding, contracts, etc) that you cannot easily duplicate or purchase.
You can buy the business at a price much lower than the market value. The seller is highly motivated to sell.

3. What will be my exit strategy to get out of the business?

Sell the business for a profit
Sell the business to a major shareholder(s) and become a silent partner
Pass the business down to a family member
Franchise

4. What skills do I have that will make me successful in this business?

Please don’t think that all that is required to ‘improve’ the business is cosmetic – by changing some of the products, re-designing the store interior, etc. These ‘improvements’ won’t double sales.

Only very good marketing, a good sales team and good systems will increase sales significantly. Think MARKETING, SALES and DELIVERY of the product or service (using systems).

5. What skills will I have to "hire in"?

6. What cash flow do I need?

What’s my break-even cash-flow (to cover expenses, wages, etc)?

7. How much working capital do I have access to?

8. Will this business suit me i.e. hours, type of operation?

Who is a Strategic Buyer? - And Should You Be One

Who is a Strategic Buyer? - And Should You Be One:

A strategic business buyer is a person or corporation that is considering buying a company based on how that new acquisition will fit into their overall long-term business plans for their existing business or an entity they are looking to build. A strategic business buyer will purchase a business or a series of businesses with the end goal of what they want their empire to look like. For example: a strategic business buyer may first buy a small business that specializes in cleaning products for cars. They may then look into buying their own car wash. These two businesses can work together to create an even stronger business structure.

Strategic business buyers are, typically, more willing to pay more for a business than financial business buyers because they are looking at the potential synergistic benefits with what they already own. However, these buyers will scrutinize financial statement and only offer terms that meet their established criteria. However the better the business will work within their plan, the more a strategic business buyer is willing to pay for it.

Sell The Sizzle Not The Steak - What Buyers Are Looking For

Sell The Sizzle Not The Steak - What Buyers Are Looking For:

What motivates a buyer to purchase a business? Individuals who attempt to buy a successful business have decided that it is a better option than starting up. Why have they decided to pursue this avenue?

There is primary reason for a buyer seeking to purchase a business is because they anticipate that they can grow your business bigger than the current owner have been able to. In assessing a business potential buyers will look at two things: firstly, the business’s client base, and secondly, their industry niche. Both of these factors give a strong indication of the future potential for the business.

The focus for the seller needs to be that they are not selling how your business has performed while they were the owner of it - a buyer is not actually interested in your past performance. Therefore the seller shouldn’t dwell on past-profit figures. A buyer is looking for where the growth is. So the seller needs to create a vision for growth in the business. What should be highlighted is how the business can grow and prosper under the ownership of the buyer. This vision should be clearly articulated to prospective buyers. Owners of businesses that sell are able to make a buyer embrace where the buyer is going. So, first create a vision for the future of your business and then sell that vision to a buyer.

Friday, October 26, 2012

Why Buying a Business in a Sluggish Economy Is a Good Idea

Why Buying a Business in a Sluggish Economy Is a Good Idea
by Phil Miller

Learn why buying a business when the economy’s bad is a smart decision.

Our economy is the worst that it has been since the 1970s. Suggesting that someone buy a business when the economy’s doing poorly may go against conventional wisdom, but the state of the economy doesn’t matter very much when it comes to buying and running a business. What matters is what you do, not when you do it.

A business’s profit directly correlates to its management, and companies succeed and fail based on the qualities of their owners. That’s why it’s essential to buy a business that you’re capable of managing efficiently. Sure, the economy has some effect on a business’s performance, but a business owner’s experience, attitude, and actions are generally the best predictors of success. There are always customers, but you have to be willing to go out there and find them.

There are also some benefits to buying a business during a sluggish economy. Costs tend to decrease because suppliers may give you better deals, rent costs may be reduced, and people may be willing to work for less. Some types of businesses even thrive during economic downturns. Examples include accounting, debt collection, auto repair, healthcare, and bulk food services.

Don’t Play the “Wait and See” Game

Despite the fact that business isn’t necessarily bad when the economy’s bad, people seem to be more risk-averse when the economy isn’t doing well. As a result, fewer people are interested in starting and buying businesses. Many would-be entrepreneurs are waiting till the economy improves before they get their feet wet. However, a bad economy didn’t stop Microsoft and Apple from being founded in the mid-1970s – and look how far those companies have come.

No entrepreneur can succeed by playing the “wait and see” game for an extended period of time. Don’t sit around hoping things will get better because there’s no guarantee that the economy will improve any time in the near future. And if the economy gets worse, you’ll wish you bought a business sooner. Any time is the right time to buy a business as long as you, the buyer, have correctly assessed the opportunity.

Whether the economy’s good or bad, the buying process is essentially the same. Purchasing a business is a major decision and investment, so it’s important to ensure that you make the right choice. Determine what type of business will thrive based on your strengths rather than suffer because of your weaknesses. Moreover, choose a business based on its profitability while considering what you’ll be able to do with it. After all, there are good business owners and there are bad business owners. Even a business that is doing poorly can be turned around in the right owner’s hands.

For a complimentary consultation:
Contact Cecil Williams (cecil@bizbrokerflorida.com) or call at 888-925-5055 ext.206. Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com Also, visit our Florida Business Exchange website at www.fbxbrokers.com

Wednesday, October 17, 2012

Are we dealing with a buyer's market?

Are we dealing with a buyer's market?

Buying a business has changed enormously over the course of the past decade, with the recession shaking things up more than we could have predicted.

We've seen a dramatic increase in administrations as unstable companies failed to cope with the drop in cashflow that followed the economic crash, while buyers themselves showed increased levels of caution when acquiring new businesses.

Things are far from steady again now, but we are seeing signs of a return to a new kind of normality; one in which buyers have the upper hand.

An abundance of easily available credit resulted in the widespread adoption of the auction as the preferred method of selling a business. It allowed sellers to maximize tension between competing buyers, keeping the pressure on and pushing the price up.

However, as the number of buyers capable of still affording to make an acquisition reduced in the wake of the crash, the remaining bidders demands increased.

Buyers were no longer happy to hope for the best and instead have started to demand more tailored information at earlier stages of the buying process in order to guarantee their success.

In essence, these factors combined to bring two key changes to the market. Firstly, the number of bidders for each business has been drastically reduced, lowering pressure and competition. And secondly, caution among buyers has increased significantly, prompting investors to be more demanding when making new acquisitions.

Obviously, sellers need to keep these issues in mind when they put their business on the market. But we hope our subscribers who are out to buy a business are also keeping an eye on the broader business atmosphere; a company's worth (and the price worth bidding for it) will of course change in different economic periods and it is clearly the case that now is looking like a good time to buy a business for less.

For a complimentary consultation:
Contact Cecil Williams (cecil@bizbrokerflorida.com) or call at 888-925-5055 ext.206. Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com Also, visit our Florida Business Exchange website at www.fbxbrokers.com

Avoid These Mistakes When Buying A Business

Buying a Business? Avoid These 5 Major Mistakes

Here is a quick summary of items to check so that you have a better chance of buying a business and ensuring a successful outcome years down the road.

Avoid these 5 major mistakes when buying a business:

1) Due Diligence, Due Diligence, Due Diligence
Doing a solid job of due diligence will help you avoid buying the wrong business or paying too much for the business. Executing a structured plan is critical to ensure by the financial and business operations aspects of a business are understood

2) Not Having Enough Cash Reserves
Do not buy a business until you have the necessary funds to both buy the business and the necessary funds to keep it open after the purchase.

3) Assuming Cash Flow will Cover Debt
There will always be a transition period when buying a new business. The transition can impact cash flow. Most buyer under estimate this impact.

4) Paying for Potential
In many businesses the value of the business is based on the condition at the time that you purchase it. There may be circumstances where potential is worth $, such as in a franchise or other proven situation, areas such as patents, devices and other situations where there is value in potential. Potential is something that typically requires your expertise & research to continue & make prosper, then it becomes your choice to gauge the potential and possibly negotiate the price through an earn-out agreement to avoid full risk.

5) Wrong Entity Structure
Consult an attorney and possibly an accountant or financial advisor to help determine what the best entity structure for you is.

For a complimentary consultation:
Contact Cecil Williams (cecil@bizbrokerflorida.com) or call at 888-925-5055 ext.206. Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com Also, visit our Florida Business Exchange website at www.fbxbrokers.com

Wednesday, October 10, 2012

Business Valuation Assessment

What Information is Needed to do a Business Valuation Assessment?

This video provides outlines the basic information needed to approximate the range of the most probable selling price a business might achieve in the marketplace.

Wednesday, October 3, 2012

Aiding Sellers In Receiving The Maximum Price For Their Business

According to the International Business Broker Association IBBA), businesses valued at less than $2 million dollars tend to take seven months or less to close. Those valued between $2 and $5 million take eleven months or less to successfully close while those valued at $5 million or more take anywhere from six to nine months to sell. Of those businesses valued at $5 million or more, 8% took two years or longer to successfully close. Brokers do expect to see an upward trend in this market over the next three months.

Adequate seller representation is needed during this process to generate a satisfactory outcome. According to the IBBA, unrealistic expectations are the number one reason why sales are not completed. My goal is to ensure each client understands the sale process. In order to achieve this goal, the first step is to have the value of the company calculated. Sellers often make use of the net income on the federal tax return to determine cash flow. In all actuality, non-cash expenses must be added back into earnings along with discretionary expenses. Market conditions and valuations must be added in along with buyers' and lenders' approaches. I can be of great assistance during this process as I provide reasoning and rationale to back up the valuation."

When the valuation is complete, I develop a customized and confidential marketing plan to target those buyers most likely to pay full value for the business. My company, Florida Business Exchange, maintains databases of potential buyers which meet necessary requirements such as ability to run the company successfully and have the funds necessary to purchase the business. My goal is to find a number of potential buyers to ensure each company sells for the highest price possible.

Once a buyer has been located, I manage the period between receiving the offer and closing the transaction. I facilitates the due diligence process while coordinating with outside legal counsel to ensure all necessary legal documents are drafted. As the broker I also coordinate the final closing date and obtain approval from all parties. I will attend the escrow closing to ensure all documents are in order.