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Why You Need to Know What Business Buyers Want

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  As a business owner, you may have one or more choices when it comes to exiting your business.  You'll either pass it on to a family member, sell it to a third party or shut it down. Generally, your business will have a different value in each of these situations.  Isn't it a good idea to know how much your business is worth now so you can decide which choice is best for you when the time comes? Recently, I spoke with a business owner with a 20-plus year track record who is considering a sale of his business. In his opinion, he has two options. One option involves selling to a family member.   The other possibility is to sell to a larger company.  I explained that one choice might bring a higher value. And the important thing to know, is which one.   There are several types of buyers : •     Financial buyers – motivated by income, usually individuals. They focus on companies with revenues under $10,000,000. These make up the bulk of business sale transaction

How to Increase the Odds of Selling Your Business

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You may be surprised to learn that if you want to sell your business, there is about a one in five chance of actually achieving that goal. Even with strong financial performance, sometimes businesses with less than $1,000,000 in revenues don’t sell.  According to BizBuySell, the largest online business-selling platform: only 20% of all of the businesses listed for sale ever sell, roughly 50% of the deals agreed to between buyer and seller never close only 10% of sales are handled by business brokers  The last fact may explain the first two! Here's my list of Why Businesses Don’t Sell: Seller believed the business was worth more than valuation showed and wouldn’t negotiate on the price or terms.    Seller wanted all cash and was unwilling to carry part of the financing. Buyer liked the business but it failed the “rule of thumb test” meaning that the cash flow was insufficient to pay the acquisition debt payments and provide the buyer with a living wage.

What's Goodwill Got to Do With It?

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The other day an attorney friend said in his best Scrooge-like voice, “I don’t like goodwill.” Because we were discussing business sales, I knew he wasn’t referring to the happy, peaceful, holiday goodwill. He meant business goodwill except he called it “blue-sky”. Contrary to popular belief, the word blue-sky is not synonymous with goodwill. Goodwill has more than one meaning especially at this time of year, but blue-sky isn’t one of them.   My attorney friend was confusing something of no value (blue-sky) with a sale-able asset (goodwill). While some owners do have blue-sky dreams, the buyer purchases goodwill and tangible assets when a business is transferred in an asset sale.  According to Merriam-Webster’s dictionary, Goodwill is:  1)     a kindly feeling of approval and support; benevolent interest or concern;  2)     the favor or advantage that a business has acquired especially through its brands and its good reputation;  3)     the value of projected ear

Selling Your Business: How Important is the Buyer?

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Successfully selling your business is a full-time job. While finding a buyer is essential, determining that a buyer is qualified, willing and able to purchase your business is another matter.  Convincing the buyer to buy your business through careful negotiation, due diligence, financing, deal structure, funding and closing is the value that a business broker brings to the transaction.  A former client said afterward, “At first, I didn’t think I needed a business broker but after going through this process, I realized that the transaction wouldn’t have happened if you weren’t involved”.   If your business is priced right, has adequate cash flow to service the acquisition debt, and you are willing to finance a portion of the goodwill , then finding a qualified buyer is usually not a challenge . This is especially true if you, as seller, have business Seller’s Discretionary Earnings (SDE) in the six-figure range. (Remember: Discretionary earnings are the sum of net profit + dep

How To Sell Your Business for Maximium Value

A couple of weeks ago I had the opportunity to talk with Brandon Wright on his weekly show, Wright Stuff Radio , about the steps to maximize the value of your business when you sell.  Being a business owner himself, Brandon has a no-nonsense approach to getting to the bottom line about topics that matter to business owners.  Listen in as we talk about what buyers want from you when you sell your business: https://soundcloud.com/wrightstuffradio/wright-stuff-radio-sheila-spangler