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. 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.”
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.
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 other 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. Third, you must know your “rock bottom” lowest price. You, as the owner, need to have this information as it will greatly facilitate and streamline all negotiations.
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.
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 brokerage professionals to properly organize the facts and numbers that support that price.
Copyright: Business Brokerage Press, Inc.
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Current Insights Regarding the Labor Shortage
BizBuySell’s Insight Report is filled with key statistics and information on a range of topics, including the labor shortage and hiring problems that many businesses currently face. Visit BizBuySell for more information about the findings that they recently reported for the third quarter of 2021. This website also offers an archive of past quarterly reports dating back to 2013.
The pandemic has “reshuffled the deck,” causing many to reassess their positions in corporate America. At this point in 2021, businesses are recovering, but the pandemic continues to play a role in business operations. 71% of business owners surveyed noted that they are facing higher costs than before the pandemic. Most respondents indicated that labor shortages have been having a significant impact on their businesses. There are issues both in hiring and retaining employees.
As the report explains, “According to the U.S. Census Bureau, retail spending in September increased 13.9% over the previous year. However, many businesses still struggle to attract or retain employees. In fact, 49% of owners say the labor shortage is impacting their business, while Business Brokers see it as the number one concern facing small businesses.”
Some of the problems related to the issue of labor shortage are not immediately obvious. As 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 are taking note. Since existing employees realize that new hires are being hired at higher wages, they are themselves often expecting raises. In turn, operational costs are going up for many businesses.
The fact is that the business owners are still selling and for a variety of reasons. BizBuySell’s statistics also indicate that of buyers who are planning to sell, 20% cite retirement as their main reason for selling, whereas 38% cite burnout as the primary reason.
According to the data collected by BizBuySell, transactions are up 17% over the last quarter, but are still 7% below pre-pandemic levels. However, it is expected that the number of transactions will grow to be well above their pre-pandemic levels in 2022.
Buyers and sellers alike should remember that the pandemic has changed business and will continue to do so in the near future. In short, the business landscape continues to evolve.
Copyright: Business Brokerage Press, Inc.
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10 Reasons Why You Need Business Brokers
This pandemic caused many business establishments to close down. Specifically, 163,735 businesses closed down during this pandemic, indicating a 23% increase in the number of business closures. However, the good news is that the economy is recovering as restrictions are slowly lifted.
This news is especially good for those looking to start or continue a business. Similarly, it also poses as a good omen for those looking to sell their business as the market just widened.
Are you among these people? Are you wondering how you can sell your business at a profitable price? Keep reading to find out how business brokers can help you with this and more!
1. Learn the Real Value of Your Business
If you’re looking to sell your business, brokers can help you understand how much you can sell your business for. Business brokers can evaluate your business accurately. Employing their expertise in business models, financial, and FF&E, they’ll be able to project your business’ value.
Such knowledge will help you set a promising price without sacrificing your profit. Aside from valuation expertise, a business broker can also help plan.
2. Extensive Connections
To find the right buyer, you need to have the right connection. Again, this is something that a business broker can help you with.
Experienced brokers not only have expertise on how to find potential buyers for you. They also have a list of professional resources such as investors to help them. There are also cases where brokers help the buyer get financing to buy your business.
They can also verify any information related to an applicant to ensure that they are who they said they are. This ensures a fraud-free negotiation.
3. Business Brokers are Great Business Marketers
Marketing strategies are as important as connections in the early stages of a sale. Posting ads on the internet or local papers is no longer enough. Today, customized advertising is a must.
As such, if you have a specific target audience in mind, consult with business brokers. They’ll know the best way to approach different audiences.
4. Negotiate a Great Deal for You
Aside from receiving a helping hand in marketing, brokers can also help in negotiating deals. For example, should the buyer question your price, they’ll use the information they gathered to defend your offer.
Business brokers also have great communication skills. When a potential buyer becomes reluctant, brokers can come in and smooth them out for you. Thus, you can rely on them to close a deal for you.
5. Get Paper Work Done
Selling a business requires extensive paperwork, which is both time-consuming and stressful. The good news is that you don’t have to go through this tedious process when you opt to go to business brokers. They not only offer negotiation and marketing services but also get the paperwork done for you.
You can trust them to get everything done for you in time. Brokers can retrieve and organize all the necessary documents for you. They’ll also be the ones to handle processing the initial offer to close the deal.
6. Allows You to Focus on Your Business
Neglecting your business during the selling process can lead to a dip in its value. This will not only lessen your selling price but can also make it unattractive to buyers. As such, while waiting for a sure buyer, you must maintain your daily business operation.
This is why it’s practical to leave the selling of the business to a business broker. It allows you to focus on your operation and maintain or even increase its value.
7. Fast Business Selling Time
Business brokers commit their time and effort to finish a deal for you. They invest all their resources to make sure that the process runs smoothly from the start.
Their expertise on how to sell a business enables them to set an achievable price range and deal. This heightens the chances of buyers swamping on your offer.
As a result, you’ll be able to find the right buyer and sell the business in no time. Note that the faster you sell, the lower the risk of encountering problems such as competition.
8. Obtain Legal Protection
The process of business acquisition requires a Contract of Sale. Such a contract requires input from various professionals, including accountants, lawyers, and conveyors. This is especially true during the negotiation period.
When you have a broker in your team, that person can act as a go-between party. Brokers communicate with every professional involved and ensure that the process is free of legal pains. The business broker also ensures that the documentation reflects exactly what the purchase and seller needs.
9. Help Maintain Confidentiality
Business sellers need to balance the information they give out to potential buyers. This technique is a known method to help protect not only the owner but also the business itself. However, the advertisement of the sale can bring a worry to the staff, suppliers, and even clients.
As such, you’ll need to ensure that potential buyers decide to forego your offer and keep the information they learned confidential. This task is very difficult to achieve without a broker. Thus, business brokers act as a buffer between you and the potential client.
They can set up a non-disclosure agreement (NDA) to ensure confidentiality. They’ll be in charge of educating potential buyers on the terms of the NDA. A broker can also help in creating a selling memorandum.
10. Maximize Profit
All the benefits mentioned above lead to the greatest one, which is to maximize profit. Some of the factors that influence your profit include setting the price too low. Another factor is when you market your business to bargain buyers.
As we’ve mentioned above, these are some of the problems that business brokers can help you with. Through their expertise, you’ll be able to get the most out of your business and at a great speed too.
Work With the Best Today!
If you’re looking for top-notch business brokers with an experienced team, Fusion is for you! We take pride in our in-depth planning session that allows for a faster and more profitable sale.
In addition, our extensive connections across all industry sectors of various sizes ensure that our clients can reach the best buyer possible. Our team also has an unmatched success record in all of St. Louis.
Still have quarries? Our team is happy to answer all your questions. So take the first step to success, talk, and join hands with us today!
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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 business. Since a partnership agreement is a legal document, it is essential that you work with a lawyer to create a contract that is specific to your company.
This type of agreement is often a more complex agreement than many business owners would initially expect, and for good reason. Due to the wide scope that a partnership can entail, the partnership agreement can address many different points.
It is important to remember that partnership agreements are designed to minimize misunderstandings and outline how the business should function. Issues such as how money is distributed, what percentage each partner will receive, and which partners are to receive a draw, should all be covered.
However, a partnership agreement does more than simply address how money is to be distributed. It should also outline key operational factors such as what happens in the event of the death of a partner. If that were to occur, for example, who will be in charge of managerial work? Issues such as how business decisions should be made, and how conflicts are to be resolved, are additional important issues that should be addressed.
A good partnership agreement, one that strives to foresee as many problems as possible, serves to protect your business against future disruptions. Every successful operation or enterprise has rules by which it operates, and your business should be no exception.
Copyright: Business Brokerage Press, Inc.
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5 Tips for How to Sell Restaurant Business
The restaurant and food industry is one of the unkind sectors to entrepreneurs.
Unfortunately, your restaurant is likely to fail due to a lack of planning and poor management. But in most cases, many restaurant owners find that after a period of success or unsuccessful selling foods and drinks, it’s best to sell their restaurants.
Whether you’re selling because you want to venture into a different industry or are currently experiencing financial strains, it’s best to be prepared. Whatever the reason you have to sell a restaurant business, below are five tips to help you succeed:
1. Estimate the Worth of the Restaurant
The first step to selling your restaurant is knowing how much it’s worth. Any interested buyers will want an in-depth rundown of the business’s financials, whether positive or negative. However, collecting all this information is a hectic, time-consuming process.
Therefore, it’s advisable to take your time to sort everything out. You should also find a way to strengthen your profits, sales, and business offerings for that period. Any buyer with a reasonable offer will want proof of steady cash flow and high-quality sales.
It’s also essential to convince your potential buyers of the potential your business has and its quality. Therefore, reducing your expenses and boosting sales to have a steady cash flow before listing the business for sale is in your best interest. In most cases, restaurants and other businesses in the food industry take six months to two years to sell.
You can take advantage of this time to streamline everything and improve your cash flow. Ensure you also look at areas where you can cut costs to come up on top.
It’s also essential to understand what depreciation is involved in your business. Everything in your restaurant has depreciated in value in the past years, from high-quality food preparation equipment to software and technology options you use.
2. Plan for It
Selling your restaurant business needs ample planning and preparation. You can’t go into the salesroom blindfolded and unprepared. You have likely invested a lot of money, resources, energy, and time into the business to get it where it is today.
You wouldn’t want all your efforts to go to waste because you didn’t take enough time to prepare for the sale. This can be an expensive mistake that you will regret down the line. Therefore, take your time to understand the sales process and how other restaurant owners have done it.
Ensure you also read the rules you need to follow and understand what’s required of you throughout the process. With poor planning and inadequate preparations, so many things could go wrong. For example, a simple contract breach could be catastrophic and derail any plans of selling the restaurant in the future.
Additionally, you can also consult your lawyer on what’s expected of you during the process. The best way to be prepared is to have a strong legal team by your side to advise you.
3. Use a Business Broker Specializing in Restaurants
One of the biggest challenges restaurant owners face when it comes to selling their restaurants is finding a buyer. In most cases, they have no idea how to go about this process and lack the right channels of communication.
This is where using a business broker can be beneficial. These professionals often have a network of potential buyers who are interested in buying new businesses or expanding their existing ones. Every day, they connect dozens of buyers with hundreds of available businesses for sale.
In many cases, you can sell your restaurant business by simply posting on social media or on some popular online platforms that allow you to list your business for free. However, brokers possess more resources and contacts than those available for free on some websites and social media networks.
They can also do a thorough background check on these prospective buyers and weed out those with no real interest in purchasing your restaurant.
4. Stage Your Property and Make It Appealing
Selling a restaurant is similar to selling a home in that buyers want to see an attractive property. Therefore, it’s imperative to make the exterior as appealing as the interior. Always keep in mind that first impressions are crucial to potential buyers.
The physical condition of your business is as essential as the financial condition. If the interior or exteriors are ugly and off-putting, potential buyers will think that you don’t take care of your business. An unattractive business also gives an impression that the business is less desirable than it is.
Hire a professional to paint the premises to improve your aesthetics. Additionally, ensure you also paint the doors and revamp the windows. Replace any broken lighting fixtures, windows, and doors.
Remember to also keep trash out of sight and stage the interior to appeal to potential buyers. Keeping the restaurant clean and organized is also key when looking to sell it.
5. Choose the Right Time to Sell
Unfortunately, most small business owners never have an exit strategy when selling their businesses. This often results in selling the business too late. Planning your exit strategy before selling the business is a smart move to get you the right price.
You can start by getting your bookkeeping and accounting in order and ensuring everything is in good shape. This ensures that your business is easy to sell when the right offer comes in. Remember also to make the necessary financial and capital improvements so that the restaurant sells quicker.
You should also have an in-depth study of the market conditions and the type of supply in the market. Are there any problems with the supply? This helps you find the right time to sell your business.
Are You Ready to Sell a Restaurant Business?
Selling a restaurant isn’t a one-day job. It requires weeks and even months of preparation to get the right deal. But for the business to look attractive to potential buyers, ensure you follow the above tips.
If you’re looking for the right professional brokerage firm to help you with the selling process, contact us today at Fusion Business Services. We will help you sell your restaurant business and help restaurant owners find the right buyer.
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