Three Signs You May Be Experiencing Burnout

Burnout is a strange phenomenon in that often a business owner doesn’t know that he or she is experiencing it until it is too late.  Owners who feel beleaguered and over stressed frequently want to sell their business and move on.  However, buyers are not so eager to accept burnout as a believable reason for why an owner wants to sell. It is the responsibility of every business owner to be on guard against potential burnout.  After all, it is better to “cash in” than to “burnout”.  In this article, we will examine a few of the key warning signs that you may be on the verge of burning out. Sign 1: Loss of Interest in Owning Your Business Once upon a time, you were likely excited about your business.  But if those days are long gone, then it might be time to move on.  Owning a business is hard work and eventually over a long period of time, it can take a toll.  If you find each day to be boring, then it is probably time to sell, move on and start a new chapter in your … [Read more...]

The Significance of a Representation Agreement When Selling a Business

Representation agreements are very common when it comes to selling a business. In order to sell a business using a Business Broker, a representation agreement is almost always required. In this article, we will explore this essential agreement and why it is so critical. Signing a representation agreement legally authorizes the sale of a business and outlines the terms and conditions. The fact is that signing a representation agreement serves to represent the end of ownership, which for many business owners, means heading into new territory. Quite often owning a business is more than “owning a business,” as the business represented a dream and/or a way of life. Walking away from the dream or lifestyle represents a significant change. For many owners this is the end of a dream. It is not uncommon for many business owners to have started a business from “scratch,” and it is also only human to feel at least somewhat attached to the creation. Phrased another way, walking away from a … [Read more...]

Do You Really Know the Value of Your Company?

It is common for executives at companies to undergo an annual physical. Likewise, these same executives will likely examine their own investments at least once a year, if not more often. However, rather perplexingly, these same capable and responsible executives never consider giving their company an annual physical unless required to do so by rule or regulations. Most Business Owners Don't Know Recently, a leading CPA firm undertook a study that was quite revealing. In particular, this study concluded that a whopping 65% of business owners don't know the value of their company and 75% of the surveyed business owners had their net worth tied up in their businesses. Phrased another way, 75% of business owners don't know how much they are worth! Perhaps most striking of all was the fact that a full 85% of business owners have no exit strategy whatsoever. Having Recurrent Valuations is a Must Business owners should know what their businesses are worth at least on an annual … [Read more...]

Common Types of Buyers When Selling A Business

Business owners considering selling should realize that they have many different types of prospective buyers. Today's prospective business buyers are more sophisticated, educated and diverse than ever before. Let's take a closer look at the different types of prospective buyers and what you should know about each of them. 1. Family Members Family members often buy businesses from other family members. There are many reasons this happens. For example, a family member is already very familiar with the business. If a family member is treating the responsibility seriously and has prepared years in advance for the responsibility of owning the business, then selling to a family member can work. However, there are many potential problems when it comes to selling a business to a family member. One problem is that the family member simply lacks the cash to buy the business. This can cause disruptions. If the family member is unprepared to run the business, then the business can suffer … [Read more...]

Financing the Sale of a Business

How the purchase of a business will be structured is something that must be dealt with early on in the selling process. The simple fact is that the financing of the sale of a business is too important to treat as an afterthought. The final structure of any sale will be the result of the negotiations between buyer and seller. In order for the sale to be completed in a satisfactory manner, it is vital that the seller answers six key questions: What is your lowest “rock bottom” price? It is important for sellers to know what is the lowest price they are willing to accept before they begin negotiations. Far too often, sellers have not determined what price is their “lowest price” and this can literally cause negotiations to fall apart. What are the tax consequences of the sale? Sellers often don't think about the tax consequences of the sale. Taxes will never go away and will be part of the sale regardless of when you sell. The key is to speak with a CPA, which may not be your … [Read more...]

Defining Goodwill When Selling A Business

You may hear the word “goodwill” thrown around a lot, but what does it really mean? When it comes to selling a business, the term refers to all the effort that the seller put into a business over the year. Goodwill can be thought of as the difference between the various tangible assets that a business has and the overall purchase price. The M&A Dictionary defines goodwill in the following way, “An intangible fixed asset that is carried as an asset on the balance sheet, such as a recognizable company or product name or strong reputation. When one company pays more than the net book value for another, the former is typically paying for goodwill. Goodwill is often viewed as an approximation of the value of a company's brand names, reputation, or long-term relationships that cannot otherwise be represented financially.” Goodwill vs. Going-Concern Now, it is important not to confuse goodwill value with “going-concern value,” as the two are definitely not the same. Going-concern … [Read more...]

A Deeper Look at Seller Financing When Selling A Business

  A buyer typically has one of three ways to buy a business – Cash, SBA Finance or Seller Finance. Cash deals are rare and require a discount in the value to attract a cash offer. SBA Finance have pros and cons and can be expensive to obtain. Also, not all businesses can qualify for SBA or business acquisition loans. The bottom line is that most buyers don’t have the necessary capital or lender resources to pay cash and that is where seller financing comes into play. The fact is that seller financing is quite common in the sale of a business. It is estimated that approximately 70% of business sales involved some form of seller finance. In this article, we will take a deeper look at some of the key points to remember. Is Seller Financing a Good Idea? Many buyers feel that a seller’s reluctance to provide seller financing is a “red flag.” The notion is that if a business is truly as good as the seller claims it to be, then providing financing shouldn’t be a “scary” … [Read more...]

Selling a Business? Be Aware of These Four Potential Issues

We’ve outlined below a few unexpected aspects of the business sale process that can pop up.  Sometimes they severely impact the turnaround time of a sale.  But if you can understand these potential issues better, you will be better prepared to try to circumvent them.  Do You Have Time on Your Side?  It’s helpful to use a Business Broker / Intermediary who will assist with the filtering of prospects vs. “suspects” or “tire kickers”.  However, the inclusion of yet another party, in addition to both the business seller and potential buyers, increases the amount of time required to navigate the process. Sellers are typically unaware of the amount of time and documentation needed to compile the required Offering Memorandum.  Once completed, the seller must provide both the Business Broker / Intermediary and potential buyer more time to review and propose meetings and pricing.  In the interim, owners are faced with the challenge of keeping their business thriving.   … [Read more...]

Your Company’s Undocumented Worth

The valuation is a major factor that influences the overall selling price of the property. Business appraisals are based upon a multitude of criteria and indisputable records such as comparables, projections, discount rates, EBITDA multiples, and more. While the appraiser may have all the information he or she needs, the business elements might be overlooked. That's why it's extremely helpful for business appraisers to first grasp the purpose of an appraisal prior to getting started. Unfortunately, the appraiser is often unaware of additional considerations that may enhance or even devalue a business' overall worth. Is There Unwritten Value? Business owners generally agree that prospective buyers are mostly looking for quality in depth of management, market share, and profitability. Though undoubtedly more subjective than documentation, figures, and calculations alone, information regarding key business elements such as market, operations, post-acquisition, value drivers, and … [Read more...]

Service Businesses Perform Highest When It Comes to Sales

Recently, Business Brokerage Press performed a survey of brokers across the country to see what sells at the highest rate, and what they discovered was very interesting. Retail business sold at 17%, food and drink related businesses at 14%, service oriented businesses sold at 25%, auto related businesses sold at 9%, manufacturing businesses sold at 16% and distribution businesses sold at 11%. Businesses labeled as “other” sold at 5% and professional practices at 4%. What is a Service Business? Looking at this gathered information, it is clear that “service type businesses” are very hot and doing quite well. The range for what is considered a service type business is, in fact, rather broad. It encompasses everything from a dry cleaner and hair stylist business to a massage therapy chain or dental practice. Just so long as a business is providing a service and doesn't fall into another category, it falls under the “service oriented” banner. Food and Drink Businesses One of the next … [Read more...]

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Matt Coletta, CBB, CBI, is a Certified Business Broker and a Certified Business Intermediary with over 25 years of experience in successfully representing Business Sellers and Buyers in various industries. Matt is a Los Angeles Business Broker and represents Business Owners throughout Southern California including: Los Angeles County, Orange County, Ventura County, West Los Angeles, City of Industry, Downtown Los Angele, Gardena, Whittier, San Gabriel, Upland, South Bay, Torrance, Newport Beach, Irvine, Brea, Anaheim, Long Beach, San Fernando Valley, Woodland Hills, Chatsworth, Sherman Oaks, North Hollywood, Northridge, Van Nuys, Burbank, Glendale, Pasadena, Sun Valley, Valencia, Santa Clarita, Palmdale, Ventura, Camarillo, Oxnard, Thousand Oaks, Simi Valley and other cities in the greater Southern California area.