Selling A Business
Unlike Residential Real Estate, where you want everyone to know your home is for sale to accomplish the greatest exposure, rarely does an owner want anyone to know the business is for sale. Realtors deal in number of bedrooms and baths, square footage and schools. Business Brokers deal in Revenue, Cost of Goods Sold, Operating Expenses, Leases, Fixture, Furniture & Equipment, Inventory and overall Business valuations, Recasting, Income Tax returns, Profit and Loss Statements, etc…
A business sale must be conducted in the Strictest Confidence to protect the ongoing viability of the business. If word gets out that a business is for sale, employees flee, competitors pounce, suppliers fret and the entire future of the business can be in jeopardy. How many “Business For Sale” signs have you ever seen? Additionally, businesses are valued on the basis of their cash flow and thus the value of the business may decline as the attention of the owner is focused on the sale.
In Residential sales, the house and the land serve as the collateral that allows the buyer to obtain traditional financing. In a business, much of the value is in the intangible goodwill. Banks are left with very little to foreclose upon should the business fail under a new owner. For that reason, owner financing is a major issue in business sale transactions. The seller, therefore, has a tremendous stake in knowing the buyer – not just in the buyer’s ability to operate the business, but his reputation and personal financial condition. Too often, an owner will find that he has been misled by a buyer who subsequently ruins the business and jeopardizes the ultimate repayment of the loan.
Why use Crown Business Group?
In so many cases, an owner will pursue a FSBO route to a sale of his business in an effort to avoid paying a commission to a Business Broker. The short term reality of the payment of a commission is overshadowed by the benefits of having a seasoned veteran of business sales working with him. Using a Business Broker can actually increase the cash that remains in a seller’s pocket following the sale.
We ,at Crown Business Group, will work in the best interest of both buyer and seller throughout the transaction, understand the many pitfalls inherent in business transactions, maintain confidentiality throughout the process, qualify buyers for reputation and financial capability, assist in structuring the various financial options available, and allow for the owner to do what he does best – run his business.
Considering the pros and cons, the stakes in the transaction are too high to proceed without competent representation from Crown Business Group.
Most Business Brokerage Firms charge a fee for a Business Evaluation. Crown Business Group provides complimentary (free of charge) Business Evaluations.
If you are thinking of selling your business – you need to know its value.
Our Evaluation gives you a thorough assessment and it is a vital step in selling a business. If the price is set too high, the business will not sell and if you price it too low, you will be missing out on thousands of dollars. In addition, valuable time and effort is wasted, resulting in a great deal of frustration.
Everyone who owns a business needs to place an accurate dollar value on it and this is where a professional broker makes a major difference with his expertise. All Our Valuations are done by a licensed, certified business intermediary using one of the following appraisal methods:
1. Multiple of Discretionary Earnings Method: A Business Valuation is based on expenses the owner has control over such as his/her salary, benefits, and other discretionary items. These are added to the profits to arrive at a cash flow total. This discretionary cash flow is available to the prospective buyer to service acquisition debt and to pay himself/herself a salary.
2. Excess Earnings Method: This business asset appraisal is used to assess a company’s tangible and intangible assets. Its main purpose is to place a value on a business’s goodwill by blending the asset-based and income approach methods.
Our business valuations are complimentary. Please contact us for additional information.
Why 80% of All Listings Don’t Sell?
There are too many Listings. The Internet is swamped with business-for-sale listings. There are hundreds of thousands available. Listed businesses do not always provide comprehensive information. A savvy buyer knows that they have to dig in and extract the information. You have to know what questions to ask, what to look for, and how to determine if what is being represented is true.
Many businesses are overpriced. The Sellers have no logical reason for their asking price outside of deciding that they want x amount. Typically, what the seller feels their business is “worth” does not have much to do with the real value of the business. That may be fine for them, but that’s no way to package a business for sale. There are additional unrealistic expectations by the sellers which cause only one in five to sell: they want all-cash sales, they do not provide adequate books and records, the business may be in decline, and, quite often, they do not disclose enough information for someone to make a logical decision.
Many businesses have problems. You need to learn everything about the business before you buy it. When Sellers misrepresent Facts, or do not disclose all of the issues when/if they arise, Buyers become leery of continuing the negotiations. Again, it comes down to knowledge and trust. When the buyer wants to buy, and the seller wants to sell, and the parties trust each other; then every challenge can be overcome.