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The three most critical factors impacting the sale of a business are… |
Why is it important to properly price a business for sale?
- A properly priced business includes measurements for the economic performance of the business as well as consideration of the current Fair Market Value (Selling Price) of Tangible and Intangible assets used in the business.
- Proper pricing of a business attracts seriously motivated Buyers and allows the Seller to receive full value for the business.
- Pricing and selling businesses correctly is achieved by working with professional experienced Business Brokers that have mastered the art of Pricing, Presentation and Profitability of businesses.
A Properly Priced Business Sells…Others Do Not!
How do you properly price a business for sale?
- Properly pricing a business is a complex process. Most Business Owners and many Business Brokers are not familiar with important details associated with professionally prepared business valuations. One important example is establishing the Purpose for which the business valuation is being prepared.
- Business Brokers Network Affiliate Members recommend and often must insist upon a business valuation focused on determining the Selling Price for the business.
- A Selling Price valuation requires a number of considerations such as proper financial statement recasting, a test for justification of purchase price and related knowledge about the industry including the following:
- Competition
- Current management
- Operating condition of the business
Affiliate Member Business Brokers are trained to help Business Sellers and Business Buyers understand how proper pricing for a business benefits both parties.
What is the importance of a third-party valuation?
- Business Buyers are skeptical of Pricing. This skepticism is normal and expected.
- To minimize Buyer's concerns about the Selling Price, Affiliate Members recommend using a qualified third-party business valuation firm to prepare an objective business valuation.
- The valuation is the key document used to establish the Fair Market Value or Selling Price for the business.
- The valuation provides third-party knowledge regarding the pricing for the business and establishes the basis for appropriately presenting the business to the marketplace.
- Business Buyers and their lenders typically assign values to businesses based upon the actual historical performance of the business.
- Be wary of Business Brokers and valuators that rely heavily on projections since they may produce misleading results.
What is the BBN Affiliate Member Business Brokers role in assisting the Business Owner in obtaining and utilizing a business valuation?
- Assist the Business Owner to collect financial and other information needed by the business valuator.
- Assist the Business Owner to identify non-essential expenses that minimize or otherwise distort the actual economic performance of the business.
- Assist the Business Owner with recasting the financial statements of the business to reflect the current economic performance.
- Review the completed business valuation with the Business Owner and answer any questions presented.
- Review and analyze the economic performance of the business for inclusion in the marketing presentation.
How do I find a qualified third-party business valuation company to price my business? Click Here
- BBN Affiliate Member Business Brokers have access to the best business valuation firms in the industry and assist Business Owners to obtain a quality business valuation.
- BBN Affiliate Member Business Brokers are trained to assist Business Owners with the data gathering process necessary for "recasting" the financial statements of the business and routinely work with business valuators.
What does it cost to have my business valued by a qualified third-party valuation company? Click Here
- Business Owners should expect to pay $4,000 to $12,000 or more usually depending upon the size of their business, measured by annual sales volume.
- It is impossible to say exactly how much a business valuation will cost prior to a meeting with an Affiliate Member Business Broker that reviews the Company's financial and other information with the Owner.
A Properly Priced Business Sells…Others Do Not!
Why is presentation an important part of the sale of most businesses?
BBN Affiliate Member Business Brokers prepare the most comprehensive, complete and informative user friendly Marketing Book in the industry. These documents are sometimes referred to as a Confidential Memorandum, Confidential Business Review or other similar names.
- BBN Affiliate Members strive to maintain the Marketing Book by updating with current financial and other pertinent information monthly, quarterly and sometimes semi-annually.
- A major feature of BBN’s Proven Process to Market and Sell Businesses is the development and implementation of a strategic marketing plan to attract the most qualified and motivated buyers to consider acquiring the business.
- The objective of a BBN Affiliate Member Business Broker when preparing or updating the Marketing Book is to include pertinent information needed for a qualified and motivated Buyer to make a decision about submitting an Offer to Purchase or Letter of Intent to acquire the business.
- These are integral parts of a comprehensive presentation included within the BBN Proven Process to Market and Sell Businesses.
Business Brokers Network Affiliate Member Business Brokers are trained professional experts that possess all of the skills required to effectively market a business and get it sold!
Why is financing an important part of the sale of a business?
Business Buyers strive to acquire as large a business as they can financially afford and generally require a significant amount of financing. Business acquisition financing is available in almost all markets in the United States.
The majority of businesses sold are of a size and type that will qualify, at least in part, for financing through the Small Business Administration (SBA). The SBA provides similar services to businesses in the United States as VA and FHA provide to the housing industry.
- Whether a Commercial Lender or Seller finances the business sale, some portion of the sales price is financed. Buyers want to leverage their cash and finance a portion of the sales price. With financing, Buyers are able to acquire a larger business, usually with a larger cash flow.
- Some businesses will not qualify for commercial financing and can only be sold if the Seller provides substantial financing to the Buyer. Some level of Seller financing is a common requirement by most SBA and other lenders.
What documents do most lenders require to “Pre-Qualify” a business for financing consideration?
Affiliate Member Business Brokers are trained to take specific steps towards preparing the business to be sold. One of the initial steps is to pre-qualify the business for financing through a reputable lender.
- Most lenders require the three most recent year's financial statements and tax returns, as well as interim financial statements for the business being sold.
- Confidential Memorandums (Marketing Book) prepared by Affiliate Member Business Brokers are often used by certain lenders for loan “Pre-Qualification”.
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What is the difference between “Book Value” and “Fair Market Value” (Selling Price) of a business? |
Book Value is:
- An accounting concept
- Not a current economic value
- Calculated using arbitrary deductions from assets, such as depreciation
Fair Market Value is:
- Current economic value of the assets
- Value of assets that generate income for the business
- Proper valuation method for buyers to consider
- Method used by banks and others for lending purposes
- Value Sellers can expect to be paid for assets (tangible and intangible) of the business
A Properly Priced Business Sells…Others Do Not!
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