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The Variety of Variables Involved in Selling Your Business

Selling a business is more than a big decision, as it is also quite complex.  Finding the right buyer for a business is at the heart of the matter.  In the recent Forbes article, “Ready to Sell Your Business? Follow These 3 Tips to Find the Best Buyer,” author Serenity Gibbons outlines that selling a business is a multifaceted process with a lot of moving parts. A central variable for those looking to sell a business is to have a coherent and well thought out exit strategy in place.  She points out that at the top of your to-do list should be selling your business the right way, and that means having a great exit strategy in place.  In fact, many experts feel that you should have an exit strategy in place even when you first open your business. Another key variable to keep in mind is that, according to Gibbons, only an estimated 20% to 30% of businesses on the market actually find buyers.  This important fact means that business owners, who usually have a large percentage of their … [Read more...]

How Employees Factor into the Success of Your Business

Quality employees are essential for the long-term success and growth of any business.  Many entrepreneurs learn this simple fact far too late.  Regardless of what kind of business you own, a handful of key employees can either make or break you.  Sadly, businesses have been destroyed by employees that don’t care, or even worse, are actually working to undermine the business that employs them.  In short, the more you evaluate your employees, the better off you and your business will be. Forbes’ article “Identifying Key Employees When Buying a Business”, from Richard Parker does a fine job in encouraging entrepreneurs to think more about how their employees impact their businesses and the importance of factoring in employees when considering the purchase of a business.  As Parker states, “One of the most important components when evaluating a business for sale is investigating its employees.”  This statement does not only apply to buyers.  Of course, with this fact in mind, sellers … [Read more...]

Due Diligence 101

Due Diligence for Buying a Business 101   Written by Alexander J. Davie   Buying a business is a high stakes matter.  What makes the process even more nerve-wracking is that a business is different from just about any other asset one can buy.  When someone purchases a piece of real estate, a car, or any other tangible product, a buyer usually knows what they are getting and can inspect the goods and has a chance to find hidden problems (or pay a specialist to find them).  A business, on the other hand, is largely intangible.  While some of the aspects of the business may be tangible, many are not.  The business will likely have receivables, inventory (both completed products and parts), intellectual property, and goodwill and reputation. Many of these assets may not have the value that the seller claims they have and may be difficult to value.  The business will also likely have liabilities like hidden debts and potential lawsuits.  Discovering the true extent of … [Read more...]

Business Valuation Myths

Myth I: Valuing a private business should only be done when the business is ready tobe sold or a lender requires a valuation as part of its due diligence process. Although the business sales and lending processes generally require that valuations be completed, if these events represent the first time an owner has a valuation completed, then you can be sure critical business and estate planning issues have not been addressed. If the business is to have a life beyond that of its current owners, then effective planning for ownership transition requires a regular valuation of the business. Myth II: Businesses in my industry always sell for two times annual revenue (the revenue multiple). So why should I pay someone to value my business? The short answer is that data on selling prices indicate that revenue multiples within an industry are generally all over the lot. These rules of thumb used by business brokers, the individuals who often facilitate private business transactions, … [Read more...]