A basic principle of pricing a small business revolves around the cash the owner receives from the operation of the business. Often businesses are priced based on a multiple of cash flow: a “rule of thumb”. In reviewing a business’ historic cash flow, it is important to take into account one-time-events, both good and [...]
At the beginning of a new year, many business owners ask themselves if this is the year to sell. There are three good questions a business owner should consider before selling his or her business. First, "Do you really want to sell this business?" If an owner is really serious about selling and has a solid reason (or reasons) to sell, it [...]
The most obvious and most common reason is cash flow; but cash flow alone is seldom the sole reason people buy small businesses. Usually there are many reasons, but they are almost always in these few areas: Cash flow is the number one consideration. The amount is important but the quality of the cash flow makes a [...]
You want to own a business – the question is whether it’s better to start up from scratch or buy an existing business. If you have a unique product or service to build a business around, or are following a passion, your choice to start a business may be clear. For an entrepreneur, making [...]
Historically, seller financing has been used to bridge the gap between the purchase price and a buyer’s down payment and bank loan. In today’s environment where bank debt is very difficult to obtain, especially where real estate is not involved, seller financing is often essential in getting a business sold. For buyers, the advantages [...]
When a seller offers seller financing, he or she is taking a risk. If you are a buyer, the seller is taking a risk on you, that you will be able to run the business successfully. Therefore, other than a seller needing the cash from the sale of the business, the biggest obstacle to seller [...]
when considering the sale of a business, one of the paramount questions is how much someone will be willing to pay for it. In other words, "How much money can I get?" What many sellers forget is that price is not a stand-alone issue. The price received for a business has to be supported [...]
For most small business owners, their ultimate goal is to sell their businesses. Some don’t yet realize this fact, but it’s true. The reason it’s true is that the alternative is not very pleasant: shutting down the business, abandoning loyal customers, firing employees, and liquidating inventories, furniture, fixtures, and equipment (often at pennies on [...]
In an earlier post (To buy a business – make an offer!), we talked about the importance of getting an offer in front of a seller if you are serious about buying a business. Here we want to discuss how to make that offer if you don’t yet have all the information you would [...]
As I write this post, we are in the midst of a week of extreme gyrations in the world-wide stock markets. The uncertainty and lack of control surrounding investing in stocks and bonds may make buying a small business an attractive alternative for some of your investment dollars. The United States, and possibly the [...]