10 Things Experts Want You to Know Before Buying or Selling a Business
When it comes to sound advice on buying or selling a small business, we asked top M&A advisors, business brokers, certified appraisers, and an SBA lender, what they think you should know. With their combined years of experience in acquisitions, exit strategy, deal structure, and financing of complex business for sale transactions, they’d like to share a few words of wisdom.
1. Sellers Can Get Their Business Listing Pre-Qualified for an SBA Loan.
If approved, the pre-qualification gives sellers a significant advantage when marketing their business to buyers in need of financing. This also allows sellers time to get their documents in order and address any important questions a lender may have about the business prior to listing it on the market. Read the full article.
2. No One Will Pay You for a Business That Amounts to Working 60 Hours a Week at $16/Hour.
No doubt, running a business is hard work and many owners are willing to work 18-hour days, seven days a week, even if it means earning a meager salary. However, buyers want to see results that show value and potential growth. Learn the two areas that matter when it comes to results that attract buyers. Read the full article.
3. Your Business May Be Worth More If You Stop Working So Hard.
In fact, a semi-absentee owner business is more valuable than an owner-operated business. Why? Because with an owner-operated business, the risk of ‘core knowledge’ belongs to one person who is planning to exit. Learn three different models of business operation, including the benefits and risks of each model. Read the full article.
4. Before Making an Offer to Buy a Business: Know the Difference Between Cash Flow, Earnings, SDE and EBIDTA.
What are the "earnings" of a small business and what does a buyers use to determine price? When it comes to true operating performance, should you look at cash flow, seller discretionary earnings, or EBITDA? Before a making an offer, it’s important to know how the sale price was determined and if it makes sense to you. Read the full article.
5. Know What Is (and Isn’t) Included in the Price of Small Business Asset Sales.
Most buyers prefer purchasing small, privately owned businesses as asset sales because there is less risk. But what about working capital? Learning how you can include working capital in the purchase by looking at examples deal structures where it’s built in. Read the full article.
6. Retaining Key Employees Is Critical to Selling a Business.
Buyers want to ensure continuous operations after the business changes hands. If critical roles and proprietary knowledge are concentrated into a few individuals, this can pose as a risk. Yet, there are many things an owner can do to retain key employees and ensure they don’t leave the business during the sales process. Read the full article.
7. Set and Defend Your Asking Price by Using Third Party Business Appraisals.
Improperly valued small businesses generally benefit no one, often putting both the owner who wants to sell and their broker at a disadvantage. Increasingly, successful brokers and their respective sellers can set the price and defend it with objective credentialed third-party appraisals. Learn how to choose a qualified third-party appraiser. Read the full article.
8. Buying a Poorly Performing ‘Turnaround’ Restaurant Can Be a Great Investment.
Why take the risk and expense of starting a restaurant from scratch when you can buy one that’s already built out? They have a lower price, plus a greater potential to earn higher profits. Learn how to spot restaurants with potential for success as well as the red flags you should look out for. Read the full article.
9. Now is a Good Time to Buy a U.S. Manufacturing Company.
As more American companies are shifting away from the reliance of goods sourcing through China based manufacturers, U.S. manufacturing output has accelerated. This points to growth opportunities. Yet, not all manufacturing companies are good acquisition targets. Learn how to identify the right small manufacturing company. Read the full article.
10. Minority and Veteran Business Buyers: Don’t Overlook All Your Available Resources.
Minority and veteran owned businesses generate millions in revenue and jobs. Many programs exist to help minority and veteran business buyers achieve their entrepreneurial goals; you just need to know where to look. Learn about the many federal, state, and local, programs that offer business development, advising, professional training, and alternative financing. Read the full article.
These are just a few pieces of sound advice shared by our community seasoned professionals. If you’re considering buying or selling a business, working with a professional business broker or M&A advisor can be extremely valuable, helping you make smart decisions, save time, and avoid costly mistakes. Locate a business broker in your area by visiting BizBuySell’s business broker directory.