A Guide for Determining a Reasonable Price for Your Small Business
There is a considerable difference between determining the value of a privately-held company and a publicly-held company. Topping the list of considerable differences is the fact that privately-held companies do not have audited financial statements. When owners of privately held companies are thinking about a potential sale, one of the most important factors to consider is business pricing.
Determining how much the business is worth can be a challenging yet important task to ensure both the seller and buyer can agree on a fair price. This long process includes looking at existing income statements and tax returns, physical assets, debt, liabilities, trends in revenue and expenses, market competition, and any other influencing factors that could affect the value of the business. Let’s take a look at how the owners of privately held companies should proceed in this process of establishing a reasonable price for their company and how business brokers can help along the way.
Private vs. Public Company Costs
An audited financial statement is a costly endeavor. In order to avoid the cost, many companies simply don’t go public. Of course, it should be noted that publicly held companies, as the name indicates, reveal much more about their finances than their privately held counterparts do. Privately held companies are often seen as being more mysterious whereas publicly held companies are considered more “open.” This gives private companies more flexibility in terms of pricing, which can allow them to potentially yield a greater profit upon the sale of their business.
Determine a Price for Your Business
Business owners looking to sell their business will, of course, want to address the fact that their company lacks the public information associated with publicly held companies. Providing prospective buyers with as much verified information about your business as possible is one of the fastest and easiest ways to overcome buyers’ concerns. A smart move for any business owner is to work closely with their accountant to go over the numbers and create an easy-to-understand presentation for prospective buyers. This should serve to allay many of their concerns.
To ensure you receive a fair asking price, it is helpful to enlist the help of an accountant or other financial advisor who has familiarity with the current pieces of your business and its valued assets. The estimated worth of your business should take into account factors such as recent sales figures, prospective buyer demand, expected future earnings, the appraised value of inventory, land, and buildings, depreciation rates, and net book values. You need to find the perfect balance between setting a competitive yet realistic financial goal. It can pay dividends in finding interested buyers quickly and getting the most for your finances when selling a privately owned business.
Working with your accountant is only the first step in providing prospective buyers with the information they need to feel comfortable. The second step is to work with an outside appraiser or another expert who can determine the value of your business. After that, you’ll want to decide on what your market price will be, as well as your “wish price,” or the price that you would ideally want. You should also determine your “rock bottom” lowest price. You, as the owner, need to have this information ready to go as it will greatly facilitate and streamline all negotiations.
Appeal to Buyers
When pricing your business, it is important to remember that the buying market will be weighing its options carefully. They need to feel like they are getting good value and that participating in this business transaction will benefit them. Work hard to make sure your pricing appeals to potential buyers and what they value. Otherwise, potential buyers may shy away from a possibly great opportunity due to an unappealing price point. When buyers are reviewing materials and working to determine what price they are willing to pay, they will look at a wide range of factors including:
- – Product diversity
- – The size of your customer base
- – Potential competitors in the area
- – Competitors on the horizon
- – Potential disruptions to your business, such as supplier problems
- – The stability of your earnings
- – The stability of the market
- – Need for capital
Different buyers may place differing levels of emphasis on certain areas, but you can be certain that the aforementioned areas will be examined with care. The process is undoubtedly rather complex. This complexity underscores the need for professional assistance and the perspective of others.
How to Achieve the Best Price for Your Business
Ultimately, the market will determine the sale price of your business. For business owners, the first and most important step is to work closely with professionals such as accountants, appraisers, Business Brokers, and M&A Advisors to establish the price of your privately held business. You can count on business broker professionals to help properly organize the facts and numbers that support that price.
Consult Business Brokers for a Smooth Transaction
Hiring a business broker has many advantages for the individual, or company, looking to buy or sell a business. Working with an experienced broker can save time and money during the transaction process and increase the chances of getting the best price possible. Brokers possess valuable market intelligence that allows them to provide clients with up-to-date market trends, perform competitive analysis, and showcase businesses appropriately. With their expertise in valuation and negotiation, they can help find potential buyers, evaluate offers, and secure a successful closing. Additionally, brokers simplify legal paperwork by ensuring its accuracy and comprehensiveness.
Trusted Georgia Business Brokers
The Business House, Inc. is a one-stop shop for all industry needs related to business transitions with over a century of experience in the field. We put emphasis on confidentiality when negotiating transactions to ensure utmost privacy while providing unmatched results. Our talented team of Georgia business brokers is ready to assist with the daunting task of selling your business. With assistance from our experts, setting a great price for your business will be a much less stressful process.
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The Best Time To Sell Your Business
If you’re a business owner, you’ve probably become very attached to your business. After all, you’ve built it from the ground up, transforming something that was just an idea into something very real. That’s why considering selling your business can be a daunting idea. There’s so much to take into account for something that you care about so much, it can be difficult to know where to start.
One of the first questions when thinking of selling is often when to sell your business. The truth is that the perfect time to contact a business broker about selling is different for every owner. So, how do you know when to sell your business?
When To Sell Your Business
There are several ways you can tell if it is time to sell your business. The market may be good, you may be daydreaming of other adventures, or you need more personal time. Each of these factors in your industry and personal life can indicate that it’s time to sell. Whatever reason you decide to sell your business, contacting a professional business broker can help ease the selling process while aiding you in getting the deal you deserve.
The Market Is Good
One of the most important signs that it’s time to contact a business broker about selling your business is that the market is good. Many business owners waste years waiting for the “perfect” selling market and end up holding onto a business they don’t want for a long period of time. While you don’t want to do that, it is essential to think about the status of the market before selling.
If the market for buying businesses in your industry is good, that might be a sign that it’s time to sell and move on to your next opportunity. After all, markets change quickly, and if you wait too long, you might miss an opportunity that won’t come around again.
Your Company Is Growing
Whether you’ve found yourself hiring more employees recently or your sales growth has exploded, if your company is growing, that can be the perfect sign that it’s time to sell. Many business owners wait until their business has begun declining and they are either losing money or close to it before they begin to wonder when to sell your business. But, the truth is that if you want the best deal possible, it’s important for the buyer of your business to be purchasing something that they know will make them money. If they know the risk will be worth it, buyers will be much more likely to spend more money and give you a great deal.
You’re Daydreaming of Other Adventures
When deciding when to sell your business, you don’t want to just think about things like how much money you’ll make from the deal. You also want to take your personal life and desires into consideration. If you’ve found yourself daydreaming about other adventures, it might be time to take the next step and move on from your business. Whether you’re thinking about starting a brand-new venture or spending some time traveling, the best time to sell can be as simple as when you are ready for something new.
You Need More Personal Time
No one can do everything at once, and sometimes your career gets in the way of living your life. If you’ve found yourself needing more personal time, it might be the right moment to speak to a business broker about selling. Whether you are dealing with some health problems or you simply want to spend more time with your family, if you need to be out of the office and in the world, it’s probably a good time to sell.
How Can a Business Broker Help You Sell Your Business?
A business broker is someone who helps buyers and sellers find and solidify the best deals when buying or selling a business. An expert business broker can not only help you know when to sell your business but how to do so and how to get the best deal. Letting an expert help you sell a business can ease the process of transferring your business to new ownership.
The Business House offers expert seller services as well as exit planning services for those who are ready to move on and take the next step in their lives. Our targeted marketing plans, expert negotiation support, business valuation advice, and experienced brokerage team can help you get the best outcome for your business sale. If you’re interested in selling your business, contact us today to learn how our professional and courteous business brokers can help you.
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Why Hire a Business Broker to Sell Your Business?
For most business owners their expertise is primarily focused on their specific industry segment and the topics and skills most relevant to their business. When it comes time to sell the business, the process can be a daunting and intimidating process if they decide to go it alone. Often the business owner will need to make operational changes in order to make their business as attractive as possible for potential buyers. Learning how to market and sell a business is different from selling the products and services which have made the business successful in the first place. By using a business brokerage firm, the business owner brings to the table a wide range of experience and expertise which will help make the process smooth as well as ensure they receive the best possible offer.
What is a business broker?
A business broker is a professional who specializes in helping business owners sell their businesses. Business brokers can provide invaluable services to a seller by bringing specialized knowledge and experience, as well as market expertise to the transaction.
Advantages of Hiring a Business Broker
There are many advantages to hiring a business broker when selling a business. Hiring an experienced professional to handle the transaction will ensure that both buyer and seller obtain the best possible outcome. Running a business is challenging and selling a business can be complicated. Make sure the process of selling your business is smooth and you receive the highest possible offer by hiring a professional that can save you time and money.
Business Valuation Expertise: An experienced business broker can accurately assess the value of a business, and then negotiate a fair price. They use a specialized set of standards to determine the worth of a business based on its assets and seller discretionary earnings. This ensures the seller gets top dollar for their business.
Advertising Expertise: A business broker knows where to advertise for maximum exposure to potential buyers as well as how to set up prospective buyer interviews.
Negotiation Skills: Business brokers know how to negotiate a successful transaction between both buyer and seller. This is particularly important when it comes to closing the deal on the sale of the business.
Knowledge in Business Transactions: A business broker understands all aspects of running a business, including legal and financial issues that may arise during a business sale. They will also be able to help buyers and sellers understand the intricacies of the transaction and make sure all parties are on the same page.
Business Connections: A business broker has a wide network of contacts that can assist in finding potential buyers for a business, as well as other resources that may be necessary during the sales process.
Discretion: Discretion is key when it comes to selling a business. A business broker’s method of marketing your business and buyer qualification procedures ensure the maximum confidentiality regarding your decision to sell.
Maximizing Business Value: A business broker can help develop strategies for a profitable exit. As an example, business brokers can often use lesser-known tax incentives and programs to decrease tax related closing costs. These practices can affect your valuation as well as decrease costs associated with selling a business so hiring a business broker can ensure you receive the highest possible offer.
What to expect from a business broker?
A business broker will help you manage the sale of your company to another interested party. They will set up the sales process, value the business, market and advertise your business, as well as negotiate on your behalf to get you the best, highest price.
When it comes to selling a business, hiring a business broker can be beneficial in many ways. From their expertise in business valuation to their negotiation and marketing skills, a knowledgeable broker can help you get the best deal possible for your business. So if you are looking to sell your business, it is worth considering hiring a professional who knows how to maximize its value and ensure a successful sale.
Hire a Business Broker from the Business House
Do you have a business to sell? Work with a trusted advisor!
At The Business House Inc., we have been helping business buyers and sellers since 1997. Our experienced team of Georgia business brokers will provide you with the knowledge, expertise, and resources you need to successfully sell your business or find a great opportunity to purchase a new one. Contact us today and let us know how we can help!
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The Importance of Owner Flexibility
You shouldn’t expect to sell your company overnight. For every company that sells quickly, there are a hundred that take many months or even years to sell. Having the correct mindset and understanding of what you must do ahead of time to prepare for the sale of your company will help you avoid a range of headaches and dramatically increase your overall chances of success.
First, and arguably most importantly, you must have the right frame of mind. Flexibility is a key attribute for any business owner looking to sell his or her business. There are many variables involved in selling a business, and that means much can go wrong. An inflexible owner can even irritate prospective buyers and inadvertently sabotage what could have otherwise been a workable deal.
Be Flexible on Price
A key part of being flexible is to be ready and willing to accept a lower price. There are many reasons why business owners may fail to achieve the price they want for their business. These factors range from lack of management depth and lack of geographical distribution to an overreliance on a handful of customers or key clients. Of course, one way to address this problem is to work with a business broker or M&A advisor in advance, so that such price issues are minimized or eliminated altogether.
Be Prepared to Compromise
In the process of selling your business, you may want to achieve confidentiality and sell your business quickly and for the price you want. However, the fact is that most sellers find that it is possible to have confidentiality, speed, and the price you want, but not all three. Ultimately, you’ll have to pick two of the three variables that are most important to you.
Be Patient
A third way in which business owner flexibility can boost the chances of success is to embrace the virtue of patience. By accepting the fact that businesses can “sit on the shelf” for a considerable period of time, you are shifting your expectations. This realization can help reduce your stress level. The fact is that stressed out owners are far more likely to make mistakes.
Sometimes Losing is Really Winning
A fourth way in which business owners should be flexible is realizing that you and your lawyer will not win every single fight. There will be many points of contention, and a smart dealmaker realizes that it is often better to have a good deal than a perfect deal. You may have to make sacrifices in order to sell your company. Simply stated, you shouldn’t expect the other side to lose every point.
At the end of the day, a savvy business owner is one that never loses sight of the final goal. Your goal is to sell your business. Seeing the situation from the buyer’s perspective will help you make better decisions on how you present your business and interact with prospective buyers. Maintaining a flexible attitude with prospective buyers helps to position you as a reasonable person who wants to make a deal. Goodwill can go a long way when obstacles do arise.
Copyright: Business Brokerage Press, Inc.
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The Main Street Lending Program
There is no doubt that the COVID-19 situation seems to change with each and every day. The disruption and chaos that the pandemic has injected into both daily life and business is obvious. Just as it is often difficult to keep track of the ebbs and flows of the pandemic, the same can be stated for keeping up to speed on the government’s response and what options exist to assist companies of all sizes.
In this article, we’ll turn our attention to an overlooked area of the government’s pandemic response and how businesses can use a whole new lending platform to navigate the choppy waters.
As the pandemic continues, you will want to be aware of the main street lending program, which is a whole new lending platform. It was designed for businesses that were financially sound prior to the pandemic. Authorized under the CARE Act, the main street lending program is quite attractive for an array of reasons. Let’s take a closer look at what makes this program almost too good to be true.
This lender delivered program is a commercial loan. Unlike the PPP, there is no forgivable component. However, the main street lending program does have one remarkable feature that will certainly grab the attention of all kinds of businesses. It can be used to refinance existing debt at a rate of around 3%. With that stated, it is also important to note that businesses cannot refinance existing debt with the current lender. Instead, a new lender must be found. Generally, loans are a minimum of a quarter million dollars and have a five-year term. In another piece of good news, there is a two-year payment deferment period.
The main street lending program can be used in a variety of ways. In short, the program is not simply for refinancing existing debt. Additionally, there is no penalty for prepayment. The way the program works is that lenders make the loans and then sell 95% of the loan value to the Fed. This of course means that the lender is only required to retain 5% of the loan on their balance sheet. The end result is that lenders can dramatically expand the amount of loans they can make.
Whether it is the PPP or a program like the main street lending program, there are solid options available to help you. Businesses looking to restructure debt or put an infusion of cash to good use may find that the main street lending program offers a very flexible loan with great interest rates.
Copyright: Business Brokerage Press, Inc.
The post The Main Street Lending Program appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
