What exactly does the term “goodwill” mean when it comes to buying or selling a business? Usually, the term “goodwill” is a reference to all the effort that a seller puts into a business over the years that he or she operates that business. In a sense, goodwill is the difference between an array of intangible, but important, assets and the total purchase price of the business. It is important not to underestimate the value of goodwill as it relates to both the long-term and short-term success of any given business. According to the M&A Dictionary, an intangible asset can be thought of as asset that is carried on the balance sheet, and it may include a company's reputation or a recognized name in the market. If a company is purchased for more than its book value, then the odds are excellent that goodwill has played a role. Goodwill most definitely contrasts and should not be confused with “going concern value.” Going concern value is usually defined as the fact that a business … [Read more...]

A recent article from Divestopedia entitled “7 Fundamentals to Due Diligence You Need to Know” explains the due diligence process and what it means regarding sellers and buyers and their roles in the process. Whether a company is being sold or it is merging with another company, it is standard practice to go through the due diligence process. Therefore, they should be aware of all the factors involved with the due diligence process. The fundamentals of due diligence can be broken into 7 categories: Historic and Projected Financial Information Technology Developments and Intellectual Property Customers and Revenue Streams Contract Agreements and Insurance Key Staff and Management Legal and Compliance Tax Issues In each of these 7 critical areas, the buyer and the seller each have to do their part in order to see the deal make it to the finish line. The seller has to be open and honest with the attorneys, their advisory team and the potential buyer; and the buyer has to be thorough in … [Read more...]

A recent article from Divestopedia entitled “When is the Best Time to Sell My Business” explains that a business owner who is looking to sell should begin preparing for the sale three years before they plan to list their business on the market. The state of the market matters when listing your business, but what you can't control this as a business owner. What you can control, however, is the state of your financial records, whether the business has any litigation outstanding, and the overall appearance and wellbeing of the business. In order to sell your business at the highest value possible, there are certain things that need to be taken care of before listing. By giving yourself about three years (the number of years of clean, verifiable financial statements you should have) to prepare your business for sale, you are giving yourself and your business the best chance on the market. Click here to read the full article. A recent article from Inc.com entitled “Small-Business … [Read more...]

Leases should never be overlooked when it comes to buying or selling a business. After all, where your business is located and how long you can stay at that location plays a key role in the overall health of your business. It is easy to get lost with “larger” issues when buying or selling a business. But in terms of stability, few factors rank as high as that of a lease. Let's explore some of the key facts you'll want to keep in mind where leases are concerned. The Different Kinds of Leases In general, there are three different kinds of leases: sub-lease, new lease and the assignment of the lease. These leases clearly differ from one another, and each will impact a business in different ways. A sub-lease is a lease within a lease. If you have a sub-lease then another party holds the original lease. It is very important to remember that in this situation the seller is the landlord. In general, sub-leasing will require that permission is granted by the original landlord. With a … [Read more...]

Buying a business can be an exciting prospect. For many prospective business owners, owning a business is the fulfillment of a decades long dream. With all of that excitement comes considerable emotion. For this reason, it is essential to step back and carefully evaluate several key factors to help you decide whether or not you are making the best financial and life decision for you. In this article, we'll examine five key factors you should consider before buying a business. What is Being Sold? If you hate the idea of owning a clothing store, then why buy one? The bottom line is that you have to have a degree of enthusiasm about what you are buying otherwise you'll experience burnout and lose interest in the business. How Good is the Business Plan? Before getting too excited about owning a business, you'll want to take a look at the business plan. You'll want to know the current business owner's goals and how they plan on going about achieving those goals. If they've not been … [Read more...]

When it comes to buying a business, nothing is more important than the factor of due diligence. For most people, this investment is the single largest financial decision that they will ever make. And with this important fact in mind, you'll want to leave absolutely no stone unturned. Let's examine the three most commonly overlooked areas when it comes to buying a business: retirement plans, 1099's and W-2's, and legal documents. 1. Examine All Legal Documents While it may sound like a “pain” to investigate all the legal documents relating to a business that you are vetting for purchase, that is exactly what you have to do. The very last thing you want is to buy a business only to have the corporate veil pierced. Everything from trademarks and copyrights to other areas of intellectual property should be carefully examined. You should be quite sure that you receive copies of everything from consulting agreements to documentation on intellectual property. 2. Retirement Plans Don't … [Read more...]

When it comes to buying a business, nothing is more important than the factor of due diligence. For most people, this investment is the single largest financial decision that they will ever make. And with this important fact in mind, you'll want to leave absolutely no stone unturned. Let's examine the three most commonly overlooked areas when it comes to buying a business: retirement plans, 1099's and W-2's, and legal documents. 1. Examine All Legal Documents While it may sound like a “pain” to investigate all the legal documents relating to a business that you are vetting for purchase, that is exactly what you have to do. The very last thing you want is to buy a business only to have the corporate veil pierced. Everything from trademarks and copyrights to other areas of intellectual property should be carefully examined. You should be quite sure that you receive copies of everything from consulting agreements to documentation on intellectual property. 2. Retirement Plans Don't … [Read more...]

You should never forget that your partnership agreement is, in fact, one of the most important business documents you will ever sign. Many people go into business with loved ones, relatives or lifelong friends only to discover (once it's too late) that they should have had a partnership agreement. A partnership agreement protects everyone involved and can help reduce problems that may arise. Outlining what will happen during different potential situations and events in a legal framework can help your business keep running smoothly. What Should Be in a Partnership Agreement? Every business is, of course, different; however, with that stated, any partnership should outline, with as much clarity as possible, the rights and responsibilities of all involved. A well written and carefully considered partnership agreement will keep small problems and disagreements from evolving into more elaborate and serious concerns. There are times to take a DIY approach and then there are times when … [Read more...]

You should never forget that your partnership agreement is, in fact, one of the most important business documents you will ever sign. Many people go into business with loved ones, relatives or lifelong friends only to discover (once it's too late) that they should have had a partnership agreement. A partnership agreement protects everyone involved and can help reduce problems that may arise. Outlining what will happen during different potential situations and events in a legal framework can help your business keep running smoothly. What Should Be in a Partnership Agreement? Every business is, of course, different; however, with that stated, any partnership should outline, with as much clarity as possible, the rights and responsibilities of all involved. A well written and carefully considered partnership agreement will keep small problems and disagreements from evolving into more elaborate and serious concerns. There are times to take a DIY approach and then there are times when … [Read more...]

Many people know that owning a business isn't for them. But for others, the appeal and lure of owning their own business can be powerful indeed. If you are uncertain as to whether or not this path is for you, there are a few simple questions you can ask to gain almost instant clarity. In this article, we will explore those key questions and help you determine if owning a business is in your future. 1. Are You Dedicated to Growing Your Income? Quite often people like the idea of making more money, at least in the abstract. But when presented with what it takes, many people realize that they don't want to do what is involved. Owning and operating a business can be a lot of work and it's not for everyone. Yet, those who embrace it can find it rewarding in a variety of ways. Being a business owner is radically different than being an employee. As an employee, you simply don't exercise much control. Summed up another way, your financial fate is clearly in the hands of someone else: … [Read more...]