Most business owners don’t give a second thought to the idea of going to the doctor for an annual physical. So why do they not give the same level of care and consideration to their company? The fact of the matter is that many executives literally go decades without giving their companies a “physical.” They only stop to truly evaluate their business when required by regulations or another matter forcing them to do so.
Consider an Annual Valuation
Let’s take a look at some of the reasons why business owners should get an annual valuation. The first issue concerns the curveballs life often throws at us. At any given time, you and your business could be unexpectedly hit with everything from partnership issues or life changes like a divorce to changes in bank relationships. When you keep careful track of the value of your business, you will know in advance how potential changes would affect you. Perhaps even more importantly, you will gain an understanding of the health of your business.
Monitor Business Growth
It’s critical to be aware of how your business compares from one year to the next. Are values definitely increasing? If not, you would surely want to know immediately and start making necessary adjustments. If a major problem were to surface, you would want to know about it right away so that you can take action. Otherwise, you might just let the years pass you by while this issue goes unchecked. This is the kind of data you will gain when you commit to regular valuations.
Be Prepared for the Unknown
You might feel far from ready to sell. However, you should always be ready if the situation does present itself. What if an amazing opportunity showed up on your doorstep? On the flip side of the coin, what if a life issue like illness put you in a situation where a sale was suddenly necessary? If you are not ready both mentally and with the necessary paperwork for your business prepared, you might miss out on a legitimate opportunity.
Statistics gathered from a prominent accounting firm showed that 65% of business owners do not know what their company is worth. However, at the same time 75% of the net worth of these business owners is tied up in their business. The problem with these statistics is quickly evident. Be sure to take as good of care of your business as you would take of yourself.
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There are over 33 million small businesses in the United States. If you’ve ever dreamed of being a small business owner, why not join them?
You don’t have to start your own business to be a business owner. Buying a business that already exists is a valid (and sometimes easier) option. You’ll already have a clear framework to work with and a preexisting customer base.
But how do you buy a business? We’re here to talk about it. Read on to learn all about how to buy a business.
1. Do Your Research
When you’re making the decision to buy a business, it’s important that you do your research ahead of time. Buying a small business is no small deal. This is a major investment that will lead to a significant life change.
You want to make sure you’re buying a business in an area in which it can thrive. Make sure the niche isn’t oversaturated and that the business has a relatively high potential for success.
If this is your first time buying or owning a business, you should also take time to understand what that entails. Owning a business isn’t easy, and while buying a preexisting business comes with its benefits, you still need to understand the basics.
2. Determine Your Budget
How much money are you able to spend on this business?
Most businesses are financed. You’ll likely be paying for part of the business in cash and the rest through a loan. Obtaining financing can be challenging, so it’s something you want to think about as early as possible.
The current business owner may offer seller financing, which may be easier than getting a loan from the bank, so keep this in mind when you’re finding a business to purchase.
Even if you get a loan, you don’t want to financially overextend yourself. Determine how much money you’re able to put into the business, and don’t forget that the cost of the business itself is not the only cost you have to think about.
You’ll have to consider the costs associated with running a business.
3. Find a Business to Buy
Now it’s time to find the right business. When you’re choosing a business, look for things like:
- An industry you understand
- Positive cashflow
- A decent reputation
- A long-term growth plan
- Something you think you’d enjoy
Not all businesses will be a good fit for you. This is a long-term commitment, so you want to find something perfect. Don’t be afraid to shop around.
You can work with online business brokers to find your new business. It can also be helpful to network with other local business owners who may have some leads or insider information about the businesses that are currently for sale.
4. Value the Business
So you’ve found a business that seems right. Now it’s time to value it. Business owners do not always accurately value their businesses, so to make sure you’re making the right choice, you’re going to have to do that on your own.
You can try to value the business on your own, but if this is your first time buying a business, it’s best to hire a professional. This can be expensive, but the cost is more than worthwhile so you know you’re not overpaying or buying a business that’s doomed to fail.
Now it’s the negotiation phase. Business owners already have prices in mind, but those prices may go up or down depending on the circumstances.
If other people want to buy that business, you may end up paying over the asking price. If you’re the only potential buyer and you think the business is overvalued, you may be able to get a lower price.
Make a written or verbal offer on the business. As long as the offer is close to what the business owner wants, they’ll respond.
When you’re done negotiating the purchase price and terms of the agreement, nothing will be official. You’ll be able to return to the negotiation if necessary after you do your due diligence.
6. Write a Letter of Intent
Your letter of intent is just a written notice that you plan on purchasing the business. Write the tentative purchase price, the terms of the agreement, and your intent to buy.
The letter of intent gives you the sole right to purchase the business for about 90 days, so you have that long to confirm without losing it.
7. Do Your Due Diligence
Once you submit the letter of intent, you’ll have access to more information about the business. You’ll get financial records, organizational documents, legal information, contract information, and more.
You want to take your time looking through all of this information before making your final decision. Something you find could lower the value of the property or turn it into a bad purchase altogether.
8. Complete the Transaction
If all is well after doing your due diligence, you’ve successfully obtained money for the business, and you agree with the terms, you can now close the transaction.
You’ll draft a purchase agreement and set a closing date. It’s helpful to have a lawyer help you with this process to make sure everything is fair.
Depending on the situation, you may need to apply for new business licenses before you’re able to start running the business on your own. It’s possible for the old licenses to carry over temporarily, but this isn’t always the case.
Congratulations on Buying a Business
Buying a business can be stressful, but once the process is over, you’ll have a whole new life path ahead of you. You’re now a business owner! That’s something to be excited about.
The process won’t be quick or easy, but it will be worthwhile.
Are you getting ready to buy a business in the St. Louis area? We want to help you. Contact us to learn more about buying (or selling) a business today.Read More
There are roughly 31.7 billion small businesses in the United States. While being an entrepreneur is great, running a business is not easy. It takes a lot of hard work and dedication. Most people go through ups and downs in entrepreneurship before they get it right.
Thankfully, there are solutions to these types of problems, like selling your business. With that said, if you want to learn how to sell your business, check out the tips below.
1. Determine the Value of Your Business
There are a number of factors to consider when selling your business. The first is to determine the value of your business. This is done by considering the value of your assets, such as property, equipment, and inventory.
You will also need to account for any outstanding debts and liabilities. Once you have a clear understanding of your business’s value, you can begin to sell it to potential buyers. It’s important to remember that the value of your business is not static; it can change over time based on a variety of factors.
As such, it is important to periodically review your business’s value and make adjustments accordingly. By doing so, you will ensure that you always receive fair value for your business.
2. Create a Strong Online Presence for Your Business
Having a strong online presence for your business is essential if you want to sell your products or services online. There are a number of ways to create a strong online presence, but one of the most important is to choose the right domain name. A domain name is the address of your website, and it should be easy to remember and relevant to your business.
Once you have chosen a domain name, you can set up a website and start promoting your products or services. In addition to creating a website, you can also create social media accounts and post regular updates about your business.
By taking these steps, you will ensure that potential customers can easily find your business online and learn more about what you have to offer.
3. Use Social Media to Reach Potential Buyers
With over three billion active social media users around the world, there’s no doubt that platforms like Facebook, Twitter, and Instagram offer a huge potential market for businesses. But with so many options out there, how can you make sure that your business is reaching its potential buyers?
First, it’s important to understand which platform or platforms your target audience is using most frequently. Then, you need to create engaging content that speaks to their needs and interests. Finally, you need to be strategic about when and how often you post in order to reach the widest possible audience.
4. Make Your Business Stand Out From the Competition
If you want your business to succeed, you need to make it stand out from the competition. There are a number of ways to do this, but it all comes down to knowing your target market and understanding what they want.
Once you’ve identified your niche, you can start to tailor your products and services to meet their needs. You should also focus on creating a strong brand that is easily recognizable and memorable. This can be achieved through creative marketing and advertising campaigns that make use of effective visuals and catchy slogans.
Lastly, always strive to provide excellent customer service that will leave a lasting impression.
5. Prepare Your Business for Sale
When you’re ready to sell your business, there are a few key things you can do to prepare it for sale and maximize its value. Start by making sure your financials are in order. Buyers will want to see detailed records of your revenue, expenses, and profits.
Next, put together a solid marketing strategy. This will help you attract interested buyers and demonstrate the potential of your business. Finally, get your legal affairs in order.
Make sure all your contracts and licenses are up-to-date, and that there are no outstanding issues that could complicate the sale. By taking these steps, you can make sure your business is in its best shape possible when it’s time to sell.
6. Negotiate the Sale Price and Other Terms
When it comes to business, there are a lot of important factors to consider. One of the most important is negotiating the sale price. This is especially true if you’re selling a business or another high-value item.
However, even if you’re not selling something expensive, it’s still important to get the best possible price for your product or service. There are several things you can do to increase your chances of success when negotiating the sale price.
First, do your research and know what the going rate is for what you’re selling. This will give you a baseline to work from. Second, be prepared to compromise. Remember, the goal is to reach an agreement that works for both parties. Third, don’t be afraid to walk away if the other party isn’t willing to meet your demands.
With these tips in mind, you’ll be well on your way to negotiating the best possible sale price.
Business Consulting: Understanding How to Sell Your Business
If you want to sell your business, we can help. At Fusion, our consultants can get you on the right track. We’ll assist you with everything you need to get started and show you how to move forward.
If you’d like to learn more about how we can assist you, call us at 314-639-0500 or contact us online. We look forward to working with you!