A Fair Price Or Are They Dreaming? Small Business Listing Prices



 

As a business buyer, the number that will be at the center of your attention throughout the business transaction is the purchase price.

 

How much are you willing to pay for the business, and how does the seller arrive at their asking price?

 

These are important considerations, and as you progress through the due diligence phase, you will be deciding if you think the price is fair. What parts of a business will you need to consider when determining the price you are wiling to pay?

 

Cash Flow and Contracts

In order to determine the cash flow of the business you will need to examine financial statements, sales records, and tax returns for the last few years.

This is a great time to enlist the help of your business broker and possibly an accountant who is familiar with analyzing business transactions. Both will have the experience necessary to determine what the records really show in terms of how the business has been doing. It is impossible to gauge the health of a business by simply looking at the bottom line of tax returns – more analysis will be necessary.

You can also have your business broker determine the operating ratios of the business, as these ratios can be a good indicator to compare against industry standards.

Examine any and all contracts and agreements the business currently has. These include purchase agreements, leases, contractor agreements, and any other legal instruments.

 

Inventory

What is the inventory? The inventory includes any materials and products that are used for resale or for client services.

It is very important that you personally and a trusted and qualified representative (like your business broker) are present for and participate in any inventory examination.

You will need to know the inventory status in order to give it a proper evaluation. You should also request the inventory counts from the end of the previous fiscal year.

You may need to have the inventory appraised if you are unable to properly appraise it yourself. The inventory counts as a hard asset, so you will need to know what dollar value to assign to it.

An important point to keep in mind is the value of the inventory is something that can be negotiated. If the inventory is incompatible with your future target market, or in poor condition – these are points to be brought up during negotiations.

 

Equipment and Furnishings

These parts of the business are important in terms of value because they are considered hard assets, so you will need to know what furnishings, equipment (like kitchen appliances in a restaurant), and vehicles are part of the deal.

For any equipment you will need the name and model number for each piece, the present condition, the value when purchased, the current value, and whether the equipment was leased or bought.

You will also need to consider what kinds of changes and improvements to the building will be needed in order to suit your future business plan.  Find out what the seller invested in terms of maintenance and leasehold improvements so you will know what it will take to keep the facility in good condition.

 

 

The price of a business may change based on the economic climate or on the motivation of the seller, but in all reality the price of a business is what a buyer is willing to pay for it. Take a good look at the inventory and other hard assets, along with the cash flow and records of the business before you head to the negotiation table with a number you consider fair.

 

Do you have more questions about how you as a buyer can determine if a price is fair? Would you like to know more about the importance of cash flow? Ask us! Please feel free to leave any questions or comments and we would be happy to help.

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

www.InfinityBusinessBrokers.com


What The 1st Half Of 2018 Might Say About The 1st Half Of 2019



2018 was a banner year in the business-for-sale marketplace, and as the first two quarters of the year are typically stronger than the last two – it may be helpful to use the first half of 2018 to see where 2019 might end up.

 

 

BizBuySell’s 2nd Quarter 2018 Insight Report once again showed record highs in the business marketplace, with small business transactions up 6.7% over the previously record-breaking numbers in the same quarter of 2017. The market has been steadily growing since the recovery for small businesses began in 2013, but the second quarter of 2018 marked the largest number of businesses changing hands since data collection began in 2007.

 

That trend continued for the rest of 2018, rounding out a record-breaking year overall. 2018 saw 10,312 businesses sold – the highest number yet. This was a 4% increase from 2017 and a very large 31% increase over 2016.

 

Why are so many businesses changing hands?

 

Baby Boomers. This large demographic group currently owns a whopping 53% of small businesses, but they are very quickly approaching retirement. Close to 60% of Baby Boomer business owners plan to sell in the next two years, so the market is primed for an influx – if not a tidal wave – of businesses for sale.

 

What does that mean for the market?

 

It means a large selection of good businesses for buyers to choose from and more competition between listings for the seller’s side of the transaction.

 

Median revenues in 2018, up 7.4% from 2017, showed small businesses were healthy. Also, the continued growth of the economy meant sellers were reaping the rewards of high sales prices – as the median sale price of the first two quarters of 2018 was up 4.4% over the same quarters of 2017. Numbers this strong will likely continue, if not increase, as we move further into 2019 – but those who survived the meltdown of 2008 may be worried about another bubble.

 

Other economic factors, like ever-changing immigration policy, tariffs, government shut-downs and trade wars could also drive the small business market – although it remains to be seen what those effects might be.

 

The smart move?

 

If you own a business and were planning on selling in the foreseeable future, now is the time. The market is booming, with active listings up 5.1%. This trend may continue to climb or we may be quickly approaching the peak. There are buyers with money and your business is in the black, so the safest bet is to sell while the selling is good. This is also true if you were considering selling so you could reinvest in a different business. The businesses on the market today are healthy, so a serial entrepreneur would be smart to take the large profit from a sale today and jump into a new opportunity now.

 

Want to know what the market looks like for your industry in particular? Do you have questions about when you should sell? Contact us today.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

www.InfinityBusinessBrokers.com


Market Confidence Drops While Prices Rise – What’s In The Tea Leaves?



 

Buyers and sellers aren’t sure what the future of the business market holds, so what does 2019 mean for those who are thinking about buying or selling a business?

 

While 2018 numbers have yet to be released, the results of the 2017 BizBuySell Buyer-Seller Confidence Index might give insight to those in the business marketplace.

 

The BizBuySell Buyer-Seller Confidence Index analyzes the survey responses of 2000 entrepreneurs. The Index is based on a score from 0 to 100, where 100 is the perfect market for buying or selling a business and 50 is a neutral response.

 

The 2017 Seller Index was down from 59 in 2016 to a score of 58 – meaning sellers are still confident that the market is in their favor, but that the positive vibes might not continue as many sellers are concerned that we are reaching a peak. Anyone who owned a business before the 2008 financial crisis remembers the boom before the bust – and with business prices inching higher and higher it’s hard to know when the market will top out.

 

Buyer confidence is down as well, from 49 to 46, but this drop is likely linked to rising business prices. Buyers have been lucky in recent years, with the 2008 recession driving business prices to bargain basement levels. In 2013 the small business market began to show signs of life, and prices steadily grew as the economy improved. Growing small business revenues have meant higher sales prices for buyers, leading to a drop in confidence that there are good deals for low capital investment. The drop may also be linked to high listing prices, as many prospective business buyers feel that many businesses are overpriced.

 

Although some sellers are definitely trying to take advantage of a market in their favor, most businesses are listing high because they are reporting very strong numbers. Buyers looking for a steal probably aren’t going to find one, but those buyers with the financial means to grab a business today will be getting a healthy business instead of a project on the brink.

 

What’s in the tea leaves for 2019 and beyond? Who knows. This booming market can only last so long, and with the slight drop in confidence on both transaction sides it may be coming sooner rather than later. The best advice is to sell now if you’re thinking about selling, and buy now if you want a business in the black.

 

Do you have more questions about the current state and possible future of the small business market? Contact us today and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

www.InfinityBusinessBrokers.com


Amazon And The Evolution Of Small Business – Local, Community, Online



Small businesses, in particular those in the retail sector, seem under attack. The retail giants – Amazon, Walmart and the like devour market share daily.

 

What’s a business owner to do?

 

Evolve with the times.

 

Sure, you have a successful business and have been doing things the same way for the last 10 or 20 years, but the world around you is shifting quickly – and smart business owners will find a way to ride the tsunami of change instead of holding their ground.

 

What can you do?

 

 

Become a community business.

 

The global economy has seen push back in recent years from a young and growing demographic of consumers who would rather buy local than from a retail giant. Your business can survive the changing market by embracing this demographic and giving them what only you can. Amazon doesn’t know what your community needs or wants, and they certainly aren’t going to open a stall at the local farmer’s market – but you can. Offer yourself as a business who is focused on building the community. Partner with other small business ventures by offering retail space to artisan products or to those manufactured locally. Join farmer’s markets, get a booth at local festivals, offer donations to local schools and charities. You will not only be forming strong local business partnerships, you will be attracting consumers because money spent with you goes right back into the community.

 

Embrace the digital world.

 

You can make the necessary changes to become a community business, but without an effort to market those changes all of your hard work will do you no good. Promote your community business with a great website, complete with some kind of online shopping experience. Let people see what you offer, check out your prices and hear your story. Highlight your local partnerships and how your dedication to the community puts your business in a unique place where shoppers can support the place where they live and work.

 

Use social media to promote what you offer, to tell the community about the events you’ll be attending and to share how you give back. Use a blog on your website to not only improve your search ranking with continually updated content but to talk about how your business partnerships can help the community grow. If booking appointments is a necessary part of your business, use an appointment booking app that allows potential customers to book appointments with you 24-7 from their mobile devices. Offer cashless payment options and advertise that you do. Ask your clientele to rate and review your business online. Research your options to see what technology is available and continually upgrade to make your business more efficient and user friendly. Do anything and everything you can within the digital world to tell your community about your local business.

 

What if you’re about ready to sell or retire, should you bother making these types of changes? Absolutely. The new generation of business buyers aren’t looking for the same type of business their parents did. They want a business that is relevant and meaningful to both the local community and the digital world at large.

 

Have questions about how you can turn your business into a community business to attract both customers and business buyers? Ask us now.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

www.InfinityBusinessBrokers.com


Miserable At Work? Mid-Life Crisis? Buy A New Life By Buying A Business



We all get burned out. Burned out at work. Burned out in relationships. Burned out on life in general.

 

You feel like you need something new, something exciting to turn your life back towards happiness – but what new adventure can make this happen?

 

A hot new car? A brand new boat? Sure, these toys can be fun – but will they really bring you life-altering satisfaction? Probably not in the long run.

 

 

The happiest people are typically people who have followed their passions. They wake up every morning with the drive to do what they do because they love it – not because they have to. If you are truly dissatisfied with your career because deep down you always wanted to pursue another passion – maybe now is the time to make that change. Maybe making the jump to entrepreneurship is for you.

 

Entrepreneurs are a unique breed. They are willing to take risks. They have drive and passion. Best of all, they get to do what they love and don’t have to answer to anyone but themselves. Sounds good, doesn’t it?

 

The good news is you don’t have to make the jump to entrepreneurship by starting from scratch. Start-ups are notoriously tough, expensive and risky. You are developing an unproven product in an unproven location using unproven operating methods.

 

You can make your life easier by buying an existing business instead. With an existing business you remove the unproven part of the equation. You get to walk into a business with a proven product, location and operating procedures. You also get a previous owner who will train you before you take over the reins.

 

There are many, many businesses for sale from multiple industry sectors – so if you’ve ever considered following a passion in the small business world, there is likely a business out there that will fit well with your goals. Try a cursory search by clicking here, and then have a conversation with us about your goals for business ownership, the types of businesses you think you’d like and the capital you have to invest. You and your broker can then narrow the search to just those businesses that will be right for you.

 

We aren’t saying that an existing business is without risk or that an existing business won’t be a challenge. Owning a business, whether you started it or not, takes dedication. The hours might be long and the work might be hard – but all of your time and energy are spent working for yourself instead of for someone else.

 

Is small business ownership for you? It could be, and it could be the key to a happier life. The only way to find out is to start looking. Skip the new car and invest your money in a business that could bring you not only financial returns, but a better quality of life.

 

Would you like to know what types of businesses would fit with your goals? Do you want to know what your dream business would cost? Ask us! Please leave any questions or comments here and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

www.InfinityBusinessBrokers.com


Why A “Used” Franchise Is Better Than Brand New



In our society, the word “used” typically carries with it a less than ideal connotation – it means that someone else got the best and the “used” buyer is left with what’s left.

 

In the business world, however, “used” gets a boost because a “used” business is an existing business. Existing businesses are good.

 

If you are thinking about getting into the franchise ownership game, you will have to initially decide if you want to start a new franchise location or try to find an existing franchise location to purchase.

 

 

If this is your first business or your first franchise – then buying existing is probably the best option.

 

Why?

 

An existing location is proven.

A franchise location that already exists and is currently running is far less of a gamble than putting a brand new franchise in an unproven location. An existing location also has an existing staff and it’s own established daily operations. There won’t be as much guess work for you as the franchise owner because there will be a seller there to train you as to what works and what doesn’t at that particular location and with that particular staff. An existing location is turn-key instead of starting from scratch.

 

An existing location has records.

Another major benefit only an existing location will have? Records. Deciding how much a business is worth to you as a buyer is far easier if there are records of the cash flow and finances of an already existing location. Buying new means a great deal of guesswork as to the future projections on your investment.

 

An existing location already has customers.

You might be considering a franchise because it comes with the added benefit of an already loyal customer base. The brand will definitely get people in the door, but and already established location will come ready-made with regular clientele.

 

An existing location offers flexibility during negotiations.

When you start a new franchise location, there are often strict rules and fee structures you must abide by – and very little (if any) room for negotiation. When you buy an existing franchise, there will likely be fees associated with an ownership transfer, but the price you pay and the terms of your deal will be largely in the hands of you and the seller. This may allow you some wiggle room in terms of price and contract terms, but this will depend on the franchise itself.

 

If a franchise is the business path for you, don’t get hung up on the “used” nature of an existing location – for most buyers it can be a far better bet. Ask your business broker about what franchises are currently available on the market and about the terms required to take over an existing franchise location.

 

Do you have more questions about how the process to buy a franchise differs from buying an independent small business? Do you want to know what the purchase of a franchise might cost? Please feel free to leave any questions or comments here and we would be happy to help.

 

 

 

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

www.InfinityBusinessBrokers.com



Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907




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