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Tackling Growth Delusions When Buying a Business

There is no doubt about it, it can be exciting to buy a new business.  However, in the process, it is very important that you don’t become unrealistic about future growth.  Keep in mind that in the vast majority of cases, if a business is poised to quickly grow substantially, the seller would be far less interested in selling.  Richard Parker’s recent article for Forbes entitled “Don’t Be Delusional About Growth When Buying a Business” seeks to instill a smart degree of caution into prospective buyers.  Parker notes that when evaluating a business and talking to the owner, many buyers come away with a sense that enormous growth is just “sitting there” waiting to be seized.  In particular, Parker cautions those buyers who are buying into an industry that they know nothing about; those individuals should be very careful.  When buying into an industry where one has no familiarity, there can be a range of problems.  The opportunities that you see may not have been tapped into by the … [Read more...]

Award Winning Brokers at B3

Three Savannah Business Brokers Achieve GABB 2019 Million Dollar Club Keith Turner, Dean Burnette, and Brian Judson, all business brokers with Best Business Brokers, each achieved more than a million dollars in sales of businesses. Mr. Burnette is the founder of Best Business Brokers and also the president of GABB in 2019 and 2020. Three Savannah business brokers were named to the prestigious Million Dollar Club of the Georgia Association of Business Brokers. The GABB Million Dollar Club Awards is a program that spotlights industry sales professionals recognizing business achievements of professional Business Brokers for successfully closing business acquisition transactions totaling one million dollars or more. The GABB has the only Accredited Real Estate School in Georgia that focuses on business and Commercial Real Estate-related transactions and CE Credits.    “GABB members have resources and experience that can smooth out the complicated … [Read more...]

Effectively Utilizing Confidentiality Agreements

Every year countless great deals, deals that would have otherwise gone through, are undone due to a failure to properly utilize and follow confidentiality agreements.  A failure to adhere to this essential contract can lead to a myriad of problems.  These issues range from employees discovering that a business is going to be sold and quitting to key customers learning of the potential sale and taking their business elsewhere.  Needless to say, issues such as these can stand in the way of a sale successfully going through.  Maintaining confidentiality throughout the sales process is of paramount importance. Utilizing a confidentiality agreement, often referred to as a non-disclosure agreement, is a common practice and one that you should fully embrace.  There are many and diverse benefits to working with a business broker; one of those benefits is that business brokers know how to properly use confidentiality agreements and what should be contained within them. By using a … [Read more...]

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...]