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. Let’s look at how the owners of privately held companies should proceed in establishing a reasonable price for their company. An audited financial statement is a costly endeavor and most small companies simply don’t have or need one.  Therefore, providing prospective buyers with as much verifiable 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 and/or business broker to go create an easy-to-understand presentation for prospective buyers. This should serve to allay many of their concerns.  Working with your accountant is the first step in providing prospective buyers with the information they … [Read more...]

Current Insights Regarding the Labor Shortage

The pandemic has “reshuffled the deck,” and NEBP is highlighting these insights from BizBuySell’s Insight Report for Q3 2021 - which covers the labor shortage and other topics.  Many people are reassessing their positions in corporate America and most respondents indicated that labor shortages have had a significant impact on their businesses. There are issues both in hiring and retaining employees.  According to the U.S. Census Bureau, retail spending in September increased 13.9% over the previous year but many businesses still struggle to attract or retain employees. Half (49%) of owners say the labor shortage is impacting their business, while business brokers see it as the number one concern facing small businesses. Because it has become common knowledge that employers are having trouble filling positions and are having to increase pay in order to attract new employees, existing employees themselves often expect - or demand - raises. In turn, operational costs are going up … [Read more...]

How to Purchase a Business Without Collateral

Many prospective business owners believe that it is impossible to purchase a business without collateral. The simple fact is that banks do expect collateral when making a loan. Since this is the core reality of the business world, it means that many who are eager to own a business will ultimately not be able to acquire one. However, while it is true that banks want collateral for loans, there are some ways that would-be business owners can still progress towards their goal of owning a business. In this article, we will explore a couple of the ways that a prospective business owner can still succeed.  First, we must make a key distinction: there is a difference between not having collateral and having no funds whatsoever.  A great place to begin the process of buying a business without collateral is to talk to the SBA. The SBA’s 7 (a) program offers up incentives to banks to make loans to potential buyers. The SBA’s 7 (a) program is a simply fantastic program for those without … [Read more...]

The Most Important Factors in Any Partnership Agreement

Every business has an array of important legal documents. However, the partnership agreement holds a unique and important place in your business and its future.  The facts are that many people choose to go into business with close friends or family members, and often these personal relationships lead to a forgoing of the partnership agreement. Don’t go this route, as it would be a major mistake. As a business owner, you have a responsibility to protect, maintain, and grow your business.  A well-written partnership agreement can greatly reduce the number of potential problems that your business can face down the road. Establishing a legal framework for the operation of your business is a must. A good partnership agreement is one in which every major aspect of how the partnership should run is outlined and spelled out in detail. At the end of the day, your partnership agreement should be viewed as a legal document that serves as a key guidepost for the operation of your … [Read more...]

Are You Truly Ready to Become a Business Owner?

People frequently dream of owning their own business, as ownership has a range of perks and benefits. However, it is important for prospective business owners to step back and consider if they are truly ready. In this article, we will explore three essential questions that you need to answer before taking the next step and buying a business. Question One – Do You Have the Right Personality Type? Truly not everyone has the right personality type to enjoy being a business owner, and it is best that you understand if you have the right set of traits before attempting a purchase. For example, you must be comfortable assuming a certain degree of risk.  Risk and business go hand-in-hand. This is true no matter how well your business may be operated. Not everyone is comfortable with this level of risk. Owning a business means that you are not only taking financial risks, but you are also giving up the stability that can come with just being an employee. Summed up, you must have the … [Read more...]

3 Overlooked Areas to Consider When Buying a Business

Without a doubt, there are a multitude of factors that go into buying a business. Since there are so many variables involved, it is easy to potentially neglect some important aspects. In this article, we will explore some of the key areas that can be overlooked when buying a business. Three areas in particular warrant special attention. #1 Legal Documents Upon first glance, it might seem obvious that all legal documents should be evaluated; however, many buyers forget that all legal documents are important and should be given weight. In short, there is no such thing as an irrelevant legal document, as one never knows what problems could be lurking within any given legal document.  For this reason, you’ll want to carefully examine any legal document before making a purchase. The stakes are simply too high to not evaluate everything from trademarks and copyrights to leasing agreements. #2 W-2 and 1099 Forms It is important to note whether or not 1099 forms were given out … [Read more...]

Disruptive Factors in Selling Your Business

At some point, every business owner will need to think about selling his or her business. This means you’ll need to be ready to overcome a range of obstacles, as the process of selling a business can be both confusing and time-consuming. This is especially true for those who have not gone through the process before. Let’s turn our attention to some of the key reasons why deals can fall apart. Psychological Factors  Buyers, like sellers, enter the process with a variety of preconceived notions about how the process should work, as well as what they consider to be “a great deal.” The psychological factors involved in selling a business shouldn’t be overlooked.  Sellers need to understand the specific wants and desires of the buyer as well as their own psychology.  Even serious buyers may have highly unrealistic expectations regarding various aspects of a business, ranging from its price to its opportunities for future growth. In some cases, they may stall due to the fact they … [Read more...]

The Importance of Quality Negotiations

When it comes to finalizing deals, successful negotiations are at the heart of the matter. It only makes sense to think about how to improve your communication skills and to choose a Business Broker or M&A Advisor who is well versed in the art of negotiation.  Cultivating Win-Win Situations Achieving a win-win for all parties is essential, and there are many components involved. It’s essential to understand what the other party is seeking and to help them also feel as though they succeeded in the deal.  One tried and tested strategy is to lead people through a series of “yeses” by starting with topics and points that can be agreed upon and then working forward. In the beginning of this negotiating strategy, the yeses may come from getting others to agree on what may be seen as trivial things. However, this step works to create the right climate for moving forward so that yeses can be obtained on more important issues. Maintaining the Flow of Information The flow of … [Read more...]

How Changing Market Conditions Can Impact Your Business

Recently, the International Business Brokers Association (IBBA) released its Q2 survey report, The IBBA and M&A Source Market Pulse. This survey features feedback from an impressive 301 brokerage professionals across 44 states with 266 transactions taking place in the quarter. The report had numerous key findings that will be of interest to those looking to buy or sell a business. The Emergence of Covid-Proof Businesses  One key fact of interest is that a full 25% of businesses are still operating below capacity due to the pandemic’s enduring impact. The Market Pulse survey concluded that a quarter of all small and medium sized businesses are either in a position where they are temporarily closed or are operating below capacity. On the other side of the equation, the survey noted that 29% of businesses have either emerged as “Covid proof” or have actually benefited from the pandemic.  For sellers with Covid resistant businesses, now could be an excellent time to sell. For buyers, … [Read more...]

Market Trends Reported in the IBBA and M&A Source Market Pulse Survey: Second Quarter 2021

Created in 2012, the IBBA and M&A Source Market Pulse Survey was created to provide business owners and their advisors with a clear understanding of ever-changing market conditions.  Through this survey, it is possible to gain clarity on businesses being sold in Main Street (values $0-$2MM) and the lower middle market (values $2MM -$50MM). Scott Bushkie served as the originator of the Market Pulse Report with IBBA and M&A Source and has continued to play a key role since the report’s inception.  A core finding of the IBBA and M&A Source Market Pulse Survey for Q2 was that there has been a big shift between the turmoil of 2020 and the climate of 2021. Across the spectrum of sizes and price ranges of businesses, sellers now have an advantage or are at least in a better position to sell their business. This is quite different from the situation in 2020.  The market has shifted towards being a seller’s market for a variety of reasons including the fact that many private equity … [Read more...]

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