Five ‘quick’ tips to boost your business’s value before you sell (Part 2)

In the last blog, we had a quick look at why you should ‘Make yourself un-necessary’ and ‘Prepare your financial documents (and be prepared to show them)’. In part two of this article, we look at three more things you can do to boost the value of your business and increase its saleability.

(Click here to read part one if you haven’t already- it’s really good)

(Pssst. Once again, ‘quick’ means quick to read. Some of these tips will take time and energy to do, but will be worth it in the long run)

3. Secure any contracts you can
(Do what you can for your business)

This tip isn’t for everyone, but it includes employment contracts, distribution contracts, supplier contracts, job contracts and anything else you can get somebody to sign up for. Honestly, contracts can be a tricky one. They can seem like a difficult subject to broach with employees, suppliers or clients, and truly, a lot of people won’t be interested in signing one… BUT, the more elements of your business your can secure under contract, the more stable your business becomes when you decide to sell (and the more saleable it becomes).

Start by talking to your suppliers and trying to lock in some good prices. They will usually be happy to sign contracts with you because it also helps their business to do so; this protects your margins. Then, try and contract some clients. Remember, to your suppliers YOU were the client, and if you have something to offer your own clients as part of the contract then you both have something to gain; this protects your profits. And finally staff. If you can secure some of your work force through contract, you can protect your business from being damaged by key staff leaving. In the short term, this actually protects your business whilst you’re there. In the long term it gives potential buyers peace of mind.

These are just three examples of how you can contract elements of your business and they are not the only ways to do it, nor will every one apply to you. Regardless, if there are elements of your business that you can secure by contract, do so to increase the ongoing stability, attractiveness and saleability of your business.



IMPORTANT: Speak to your solicitor about drafting your contracts. Don’t write the contracts yourself.

4. Sort your lease out

(Absolutely MUST have- especially if location is important)

If your business’s location is important to its day-to-day operations (and to its ongoing success), then you must absolutely take steps to negotiate as attractive a lease as possible in regards to both its length and options. Like point three, this one won’t necessarily apply to everyone, nor is there a one size fits all solution. Essentially, when it is time to sell you absolutely cannot have any uncertainty surrounding the lease and terms.

What happens if you really can’t resolve your lease issues? As we said in part one, when you sell your business, you must become a master of risk management. That risk needs to be either resolved or offset by a price reduction. If you can’t resolve a lease issue, then you may need to relocate prior to selling. Yes, it will cost money, but quite simply, it just won’t sell if a buyer sees that they will have to relocate themselves shortly after selling. Even for office based business or businesses where the location isn’t important, moving hurts, and buyers won’t want to do it.

Don’t put it off until just before you sell, talk to your landlord about your long term lease plans. Whether you sell your business or you decide to stay, it will benefit you in either case.

(PS. If you own a business in retail, cafe/restaurant, health/fitness or anything similar, resolving your lease issues is vital to finding a buyer for your business)

5. Make a plan for money you won’t make
(To attract WAY more buyers and charge more)

Here I’m talking about preparing a nice long marketing plan and growth plan that extends well beyond the time you sell your business. You need to develop a plan that will benefit you whilst you still own the business, and that a new owner will continue to benefit from in the future.

But isn’t the business’s future success the future owner’s problem?

Of course it is! BUT, the price for which you sell your business and speed at which you sell it are definitely things that fall under your area of concern. For a buyer, a solid plan to move the business forward represents the difference between buying a well built row boat and the same row boat with a massive 20 horse power outboard motor attached to it. Neither of them will sink, but the speed boat will take the new owner where he wants to get- plus, which one would be worth more to YOU?

This one? Or this one?
(sorry about the dodgy photoshop)

Now, like all the tips in this series, this one is easier said than done. Many business owners would seriously struggle to find the time needed to put together such a plan by themselves, so it may be worth looking at getting some outside help (Someone like Matt Braithwaite-Young who can help you with developing a marketing plan). In the end, a business that goes on the market with an ongoing marketing/business plan represents a premium offering. You don’t have to do it, but it definitely adds to your business’s saleability.

IN CONCLUSION

In the end, most businesses won’t have the time or resources to implement everything, so if you had to choose- do it in this order:

1. Prepare your financial documents (and be prepared to show them) (Absolutely MUST have)
2. Sort our your lease (Absolutely MUST have- especially if location is important for your business)
3. Secure any contracts (Do what you can for your business)
4. Put the business under management and systemise it (To attract WAY more buyers and charge more)
5. Put a marketing system in place (To attract WAY more buyers and charge more)

 

Now, is this list the be-all and end-all of business preparation tips? Absolutely not! There are so many things that you can do before you sell to make your business WAY more attractive to buyers. If you would like to keep learning about how to about boost your business’s value before you sell, click here to sign up to our mailing list and we’ll email you when the next blog is up.

Thanks for reading!

Principal of Xcllusive Business Sales
Sell your business with Certainty

Would you like to talk to someone about Selling a Business? Our team are happy to talk to you about your personal circumstances so if you’d like to know a bit more about selling your business call us on (02) 9817 3331, or fill in an enquiry by clicking here. We look forward to talking to you.


DISCLAIMER: The information contained in this blog is for information purposes only. It is not meant to be considered as business advice. The points of view expressed represent reactions to the current business market and it should be noted that the market may be subject to change in the future. Reader’s specific circumstances may be different and have not been taken into consideration. Always consult with your professional advisors for any business advice.

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Five ‘quick’ tips to boost your business’s value before you sell. (part 1)

One of the biggest concerns for a buyer is how the business will continue to function without you running it. Will it continue as it always has, or will all hell break loose and everything go wrong the second you’re out the door? These things REALLY matter to buyers and whatever you can do to alleviate this concern will absolutely work in your favour when you come to sell. You must become a master of risk management. What follows are five ‘quick’ tips that you can use to boost the value and saleability of your business.

(Ahem. ‘quick’ means quick to read, not necessarily quick to implement. Some of these require some work, but will be worth it to you in the long run)

1. Make yourself un-necessary.
(to attract WAY more buyers and charge more too)

If you left your business tomorrow, how long would it take for it to fall to the ground in a dramatic fiery heap? Trust me, that’s something that buyers have a massive concern about. If the success of the business is wholly tied to you being there, then when you’re not, it’s a perfectly reasonable concern to them that things may go wrong. Imagine you’re Fred Flintstone trying to sell his foot powered car.

The buyers would be worrying that the car might be too heavy to run, or impossible to break in or that turning will be a problem. This is because the car doesn’t run itself- Fred Flintstone runs the car (literally in this case). Without Fred behind the wheel, will the car run at all? This is what buyers are worried about. They’re quite happy to drive the car, but they want to know that the car will work without you. So when it comes to your business, that means implementing systems, training your existing staff to manager positions and if you need to, even hiring new staff. Build your business so that you don’t need to be there for every single day. Change your business…

 …from this… …to this…

The downside to this is that it’s takes a lot of time and energy to turn your business into a Lamborghini (figuratively speaking). But if you can get your business to the point where you can say ‘Under Management’ in your advertisement, the number of prospective buyers will soar (and you can also charge a lot more too).

… Plus, maybe a Lamborghini is a little too lofty for most businesses. The majority of buyers will be truly happy with a car that’s reliable and that does the job.

2. Prepare your financial documents (and be prepared to show them)
(Absolutely MUST have) 

Let’s continue with the the car analogy for a little while longer. When buying a business, there is no trusted ‘mechanic’ that a buyer can take a business to who can tell them if it’s a good business or not. They have to establish that for themselves. So, they conduct ‘due diligence’; they spend their own time and money on investigating the business in order to make a decision about whether to purchase it or not. It is the most important part of their decision making process and it can’t done without seeing your financial documents such as tax returns, profit and loss statements, balance sheet, bookings, forward orders, quotes etc. Here’s why:


Imagine you’re buying the Kingswood Ute in the picture above. You love how it looks, you love how it drives- but then you ask the owner to pop the bonnet so you can look under the hood. The owner says ‘no’ and starts making excuses about why you can’t. Stuff like:

  • I don’t want to let you look under the hood until you pay a deposit
  • The car doesn’t have anything under the hood
  • Oh, sorry, the bonnet doesn’t open
  • You don’t need to look under the bonnet, you can see how well it drives
  • Tell you what, how about I just show you these engine mounts. That should do right?
  • Um, look the engine isn’t ready yet, how about I send it off to my mechanic and I’ll get it to you in a few weeks…

Would YOU trust the owner if they said those things?

For businesses, providing financial documentation (such as tax returns, profit and loss statements, etc) is the equivalent of popping the hood in the above example. If you are unable provide financial books and records, chances are you’ve got a very legitimate reason- but to a buyer, any excuse you give runs the risk of sounding as untrustworthy as any of the reasons above.

So what does that mean for you? Make sure that when you put your business on the market your financial documents are ready. You’re going to want at least one year of well-recorded financials (but in reality most people expect three), they need to be presentable and easy to understand, and above all else, you have to be willing to share them with buyers who have signed a confidentiality agreement.

One more quick tip: don’t stop keeping good records when you go on the market. Keep your financial documentation up to date! If you’re on the market for six months, and you haven’t been keeping up to date over that period, then you’re going to find yourself in a position where you’re missing your most important information.

… Ok, I know the heading said that there were five tips, but we’re already up to about 900 words which is far too long for a blog. SO, make sure to watch this space for Part Two. If you aren’t receiving email updates for these blogs, click here to sign up to our mailing list and we’ll email you when Part 2 comes out.

By Zoran Sarabaca

Principal of Xcllusive Business Sales
Sell your business with Certainty 

Would you like to talk to someone about how to sell YOUR business? Our team are happy to talk to you about your personal circumstances so if you’d like to know a bit more about selling your business call us on (02) 9817 3331, or fill in an enquiry by clicking here. We look forward to talking to you.


DISCLAIMER: The information contained in this blog is for information purposes only. It is not meant to be considered as business advice. The points of view expressed represent reactions to the current business market and it should be noted that the market may be subject to change in the future. Reader’s specific circumstances may be different and have not been taken into consideration. Always consult with your professional advisors for any business advice.

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The Low-Down on Cash Businesses: How the cash economy impacts business value.

For decades our parents and grandparents were buying and selling businesses based on ‘gut feelings’. They bought on how many coffees sold, or kegs sold or packets of cigarettes sold. They valued based on turnover or rules of thumb. They valued based on cash.

Those days are well and truly behind us, and it’s important that you know what’s changed.

Since the Global Financial Crisis of 2007 we live in a very different world. The uncertainties, and in particular the business practices introduced to resolve those uncertainties, have become a part of the business sales market for good. The practice we’re pointing at in this blog is the now absolute necessity for good financials. Quite simply, if you want to get the value from selling your business that you are hoping for, you absolutely need clearly recorded and verifiable figures. This is to satisfy two primary needs.

  1. New consumer protection laws require that clearly recorded and verifiable figures are needed in order to obtain finance.
    As part of the National Consumer Credit Protection Act 2009, providers of credit services are required to meet a range of new ‘responsible lending obligations’. Amongst other things, lenders are required by law to make enquiries about a borrowers financial situation and to take reasonable steps to verify that situation. Technically this has always been the case; it’s just a lot stricter now. For business buyers that means that everything they provide must be verifiable, must be above board and absolutely cannot be based on unreported cash sales. That might sound like it’s their problem, but if you want them to buy your business, it’s your problem.
    (If you want to know more on this, check out the National Consumer Protection Act 2009, Chapter Three, Division Four. Be warned though- it’s not a page turner)
  2. Buyers are considerably more cautious than they used to be- It’s a Buyer’s Market.
    Though we may have weathered the financial storm of the GFC, there are few who can say that we were left unscathed. The biggest change that the business sales market saw was a change in where buyers see business value- and it’s an important distinction. In the past, buyers saw the value in a business as coming from how much money they could make from it. Now, they see value in a business as coming from how much they will make from it in the worst case scenario. In order for the buyer to determine this, they need verifiable historical figures.

What to do if you have a business with a lot of income that is not being banked:
If you want to sell a business with a lot of unrecorded income, there are two ways do it.

One: Start recording and banking immediately and wait a few more years so that you have some historical financials. For many people the thought of doing that 100% might be horrifying, but remember, though the current setup may be excellent for you personally it could render your business close to unsellable at its full asking price- no matter how much money it is actually making. If you don’t want to do this, the other options is…

Two: Reduce your asking price to a figure represented by your recorded income. Again, this may be horrifying to some people, but you have to remember that in selling a business, you are entering a market where un-recorded income is largely ignored. It that tastes a little sour, keep in mind that though you may achieve a lower return from the sale, you have still benefited from this un-recorded income for as long as the business has been running.

What if you have excellently recorded income?
If you own a traditionally cash operated business where you have a long history and everything is recorded and “on the books” then you are in a very good position to sell. Good figures in these industries helps your business stand out and you should sell quickly in the current market for a good price.

If you would like to talk to an agent today and would like to know how to sell a business with your current circumstances call Xcllusive Business Brokers on (02) 9817 3331. We look forward to talking to you about your situation.

By Zoran Sarabaca

Principal of Xcllusive Business Sales
Sell your business with Certainty

 

 

DISCLAIMER: The information contained in this blog is for information purposes only. It is not meant to be considered as business advice. The points of view expressed represent reactions to the current business market and it should be noted that the market may be subject to change in the future. Reader’s specific circumstances may be different and have not been taken into consideration. Always consult with your professional advisors for any business advice.

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The truth about overseas business buyers: What you need to know about ‘overseas buyers’ with ‘deep pockets’.

On the road to selling your business you will likely come face to face with someone claiming that they can sell your business to an overseas buyer for more than it is worth. Despite recent actions taken by the ACCC against unscrupulous vendors (1) making these claims, the myth about overseas buyers continues to plague business sellers.

Advertising overseas will cost as much if not more than it does in Australia and knowing the truth about overseas buyers could save you a lot of wasted money.

So, if you’re thinking of selling your business through a business agency now or at any time down the road, take the time to arm yourself with the myths and facts about overseas buyers.

Myth: Many overseas buyers are willing to pay up to three times what a business is worth.

Fact: If somebody has enough money to pay three times a business’s value you can assume one thing about them: They have a lot of money. There are only a handful of ways to get a lot of money, and most of them revolve around being a savvy investor and/or a good business person, neither of whom would even think about paying three times anything’s value.

Myth: The overseas market is brimming with buyers for the Australian market.

Fact: Though there is a chance of selling to an overseas buyer, unless you are a major international, that chance is insignificantly remote. In fact, one of the sites we use to sell businesses have portals in France, Germany, Hong Kong, Italy, Luxembourg and new Zealand. So technically we advertise businesses for sale in an overseas forum. So why don’t we advertise that we have ‘overseas buyers’? Because the number of overseas buyers is infinitesimally smaller than the number of local buyers and it would be close to unethical to even mention them.

So, knowing what you know now, exactly what percentage of businesses do you think actually sell to overseas buyers? Based on a survey of the Australian Institute of Business Broker’s 353 Members, in the 2012 financial year only 2.6% of businesses were actually sold to overseas buyers or to overseas entities.(2)

In summary, only a tiny, tiny fraction of buyers come from overseas. The ones that do aren’t looking to bankrupt themselves to get a visa, they are good business people and they have the time to be picky. So in short, if anybody tells you they can sell your business for more than its worth to overseas buyers, they’re probably not the business agent for you.

By Zoran Sarabaca

Have you ever been told by an agent that they can sell your business to an overseas buyer? OR have you actually sold your business to an overseas buyer? We’d like to here from you!

To find out more about this topic or if have any questions about business sales make sure you give us a call on (02) 9817 3331 or submit a response or enquiry through the site. We look forward to talking to you.

Disclaimer: The information in this article is intended as information only and should not be taken as professional business advice.

Sources:
(1) http://www.aibb.org.au/press_release.php?Id=23
(2) http://www.aibb.org.au/press_release.php?Id=29

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Here are the three questions you’ll be asked when you sell your business, that if you don’t have the right answer to, could cost you big.

By the time most business owners decide to sell it will be too late to answer these three questions correctly. Considering that they are the first three questions you will be asked as a business seller, and that they are impossible to answer without forethought; getting the answers for them in advance will make your business more desirable, more sellable and yes, should get you more more money for your investment.

So here they are; the three questions that you have to know the answer to before you decide to sell.

  1. Why are you selling your business?
    More often than not, a business gets put on the market as a reaction to something such as the owner’s personal situation changing, the business losing money, industry problems or simply that the owner is tired of it. Under these circumstances, selling your business is a necessity- not a choice, which puts you as the seller on the back-foot in negotiations.
    So it falls to you to know why you’re selling before you want to sell. Quite simply; plan to sell. Telling a buyer that selling was part of your three year business plan, then showing them the plan, is much better than saying ‘I’m over it’.
  2. Can I get a copy of your financials?
    This one’s an easy one. If your answer isn’t a big ‘YES’, then you’re going to be making things very difficult for yourself. Buyers don’t buy without financials any more, banks don’t lend without financials (did they ever?) and to put a nail in the coffin, many business brokers won’t even take you on without financials.
    So in short, make your answer ‘Yes’ by keeping good, up-to-date records. Essentially, make a habit of good record keeping now and your business will be considerably more sellable down the line.
  3. How do you expect the business to perform in the future?
    ‘It has potential’ is not the right answer- but it’s easily the most common. This question is impossible to answer off-the-cuff because it needs forethought. Have your marketing plans ready, have copies of your business’s systems and growth plans. Having these ready is the difference between showing someone your business and selling someone your business. This may sound like a tremendous amount of work, but in reality, when you sell a business you aren’t actually selling how profitable your business is now; you are selling the future profitability of your business- and to sell them that, you need to prove it.
    So, get used to long term-planning and don’t stop when you decide to sell. Planning for profits you personally aren’t going to make might feel pointless but in reality you are making that profit when someone buys your business.

Is that all?

Of course not! There are plenty of questions you’ll get asked when selling your business. We picked these three because they are the three top ones you can plan for today for extra money in the bank when you sell.

Want to know more about selling your business? Call Xcllusive on 02 9817 3331 or click here to submit an enquiry and speak to an expert consultant today- Sell your business with certainty.

By Zoran Sarabaca

Principal Xcllusive Business Sales

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Why rising corporate layoffs meant that now was the best time to launch our new Franchise Broking Service

Just a quick update!
With a cloud of corporate layoffs looming on the horizon it is very, very likely that we are about to see a rise in demand for franchises for sale. The security offered by being part of a franchising model, along with the relatively low entry cost (as compared to starting or buying a business) means that franchising has always been a solid go-to for the recently unemployed departing from corporate and middle management jobs.

With this in mind, Xcllusive have recently launched our new Franchise Broking Service to be headed up by the newest member of the Xcllusive team Frank Sassin. With experience with over 60 different franchise models, we are about to start really pushing our expertise in this field. If all goes to plan, you can expect to see a greater number of franchises on Xcllusive’s businesses for sale page over the coming months.

And of course, we would like to welcome Frank Sassin to the Xcllusive team!

If you know anybody interested in selling their franchise (or if you are interested in selling your franchise) make sure you visit our franchise broking page and leave an enquiry!

By Zoran Sarabaca

Xcllusive Business Sales
Sell your business with Certainty

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How could rises in positivity towards business finance affect the business sales market? Survey Results 1/9/2012

What Xcllusive Says:


Zoran Sarabaca, Pricipal
“This survey shows that the uncertainty in the business salesmarket is still an issue with little more than slight rises or falls in positivity for all questions surveyed.The big surprise came from a 6% rise in positivity towards the ease at which a business purchase can be financed. Unfortunately this rise in positivity still leaves the result at below neutral.Historically any rise in this area has meant that confidence in other areas of the market also will be boosted over time as a result.

This can to be attributed to the simple fact that the easier it is to finance a business purchase, the easier it is to buy a business.

Buyersʼ perceptions of attainability have almost always affected their perceptions of business value. If we continue to see raises in the financial area it could an indicator that the market will improve.

In the meantime, however the market is looking as uncertain as it was in the last survey period and it remains to be seen if this situation will change.”

- Zoran Sarabaca

The Results

Xcllusive survey results

The overall results of the July / August Business Buyer Sentiment Survey indicates that current business buyerʼs confidence in the market is low, with a slight rise since the last survey; two months ago.

There were only minor changes in all areas, as this survey once again found that results in all areas to be either neutral or low.

Question 1, indicating the likelihood of buyers finding a business at this time; saw a slight rise in positivity with 41.2% of respondents returning a positive response and 20.2% of buyers responding negatively.

Question 2, which examined the current market as compared to six months ago, was static with a definitive 53.1% of respondents believing that there has been no change in the market with only 28.4% of respondents reporting that the market appears to have improved.

Question 3, which asked respondents whether or not they believe they should hold off buying a business, returned a fairly even spread of results with 36% responding negatively, 31.6% returning a neutral response and 32.5% responding positively.

Surprisingly, Question 4, which indicates the ease at which a business purchase may be financed, returned the largest overall increase in positivity with a 6% rise. Although 58.8% of respondents still responded negatively, that number is significantly down from the 73.2% of respondents from the last survey period.

We’d love to know what you think too! Take part in the next survey by clicking here. It only takes about a minute!

By Zoran Sarabaca

Xcllusive Business Sales
Sell your business with Certainty

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Survey Results 1/7/2012

What Xcllusive Says:


Zoran Sarabaca, Pricipal
“This survey has shown a lot of uncertainty on the market, with buyers either equally divided about the possibility of finding a good business or uncertain. One thing that most of the buyers seem to agree on is the availability of finance for SMEs being either very hard or at best, difficult to attain. Because of this market state, it is a frequent occurrence that sellers will provide some form of vendor finance in order to secure the sale.Uncertainty in the market always increases perceived risk from the buyers’ point of view. This, together with hard to obtain finance has definitely created a buyers’ market. When the market is in this state, owners of good businesses are generally discouraged from selling, creating a shortage of quality businesses for sale. Ironically, this in turn makes good businesses easier to sell due to a lack of competition, though, still with prices lower than pre-GFC. From what we can see in this market, it doesn’t look like this trend is going to change any time soon.”

- Zoran Sarabaca

The Results

Xcllusive survey results

This month’s survey has seen neutral or low results for all questions asked. Question one, which indicates the likelihood of buyers finding a business that suits their requirements in the current market, returned a fairly even spread of results. 37.5% of respondents returned a positive response, 31.5% reported that they were unsure, and 30.9% of respondents returned a negative response.

Question three, which asked respondents whether they would be more likely to purchase a business now or in six months, returned a similar spread of results with 38.5% responding negatively, 27.7% reporting that there will be no change and 33.7% saying that they believe that now is a good time to purchase a business.

Question two, which compared the current business sales industry to how it was six months ago, returned a more definitive result with 46.3% of respondents reporting that there has been no change in the industry from that time.

Of the four questions, the most significant result was from question four which indicates the ease at which finance for a business purchase can be accessed, with a massive 73.2% of respondents reporting that finance is either difficult or very hard to obtain, and only 6% of respondents returning a positive response.

The sum of these results has indicated that the overall sentiment from business buyers is low, sitting just below neutral.

By Zoran Sarabaca

Xcllusive Business Sales
Sell your business with Certainty

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How rising unemployment may affect the business sales market and the saleability of your business

Three months ago I was at my local hotel and noticed a new member of the bar staff. He looked out of place amongst the others behind the bar so I struck up a conversation. Turns out, he used to be a financial analyst with one of Australia’s biggest financial institutions.

These are strange times we live in.

With many major corporations and financial institutions announcing mass layoffs over the past few weeks, a new wave of negativity has been injected into the market. Despite this, recent survey results have actually showed an increase in both a buyer’s likelihood of buying a business (6.9%+) and positivity towards buying a business today (3.1%+)

Given the doom and gloom being reported at the moment, these results may seem incongruous with current events, however they actually tie in quite closely with the motivations that spur business buyers. The motivation for buying a business changes with the economic climate. In positive times the business buyer pool is largely populated with securely employed individuals looking to take a risk by leaving their jobs with the intention of making higher profits than their jobs can provide. In uncertain times however, this motivation couldn’t be farther from their minds.

In September of last year we sold a business to an individual who was leaving their middle management job because they weren’t certain that the job was going to remain secure. This person’s motivations are a perfect example of why many people are buying businesses today: to take control of their financial future and secure their income through investment. With the recent layoffs in middle management, it is expected that this motivation will be the driving force behind many business sales in the months to come.

With this motivation also comes a change in the criteria that most attracts buyers. In times of more certainty, buyers are willing to take more risks in exchange for potential high profits. Though the motivation for high profits still remains, the stability of the business is becoming increasingly more important than it already was for this new pool of buyers. High-profit, high-risk businesses are becoming significantly harder to find buyers for at premium prices, and the reason is this: at the moment buyers are more concerned with financial security than increasing their wealth. It is for this reason that the profit multiplier used to value businesses is dropping.

So how will this affect your business? The more protected your business is, the more likely it is to sell. The factors that are most important to buyers today are as follows-

  • Length of operation
  • Even spread of suppliers
  • Even spread of clients
  • Good lease length with options
  • Solid and thorough financials
  • Limited competition with reasonable barriers to entry

This is not to say that buyers weren’t concerned with these things in the past, but more to say that in the past these factors could be more easily offset by high profits. In contrast, in today’s market they affect the business’s ability to sell or even receive enquiries unless the price is dropped dramatically.

The main point to be taken away from this is that there is a new wave of cautious buyers entering the market. These buyers are in a position where buying a business is increasingly becoming a necessity, but as they are coming from otherwise stable jobs they will be looking for equal stability in their investment. Businesses with higher risk factors will still sell, but it is vital that the risk is offset in the price for which it is marketed. Having more buyers is always a good thing, but the game is changing, and how you play it will determine your success.

By Zoran Sarabaca

Xcllusive Business Sales
Sell your business with Certainty

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Business Owner’s Greatest Mystery – How Much is My Business Really Worth?

It is as if the value of a business is the worlds biggest kept secret. Business owners can spend all their business life (in many cases decades) and not really know the real value of their business. By real value I don’t mean book value, but how much would somebody pay to own it.

Often the owner has a overly optimistic value of what the business could sell for due to anecdotal and inaccurate information they have heard from colleges and acquaintances, mostly not first hand but from somebody who has heard of someone who has sold a business. It is more rumour then the real information.

Another way that business owners guess the value of their business is by looking for businesses advertised in daily papers and on the Internet, searching for a business that is similar in size and in the same industry and then comparing those businesses with their own.

There are two reasons why this method wont give you good indication of your business value. The first is there are no two businesses alike. They all rely differently on their owners, have different customers and different risks associated with them, so you’re not comparing apples with apples. The second reason is that businesses often sell for a price quiet different for the one they are being advertised for or don’t sell at all.

So, how do you than gauge how much your business is worth at any given time of its life?

Like this, first detach yourself emotionally from the business then ask yourself the following question:”Knowing what I know now, about my business, it’s profits, advantages and disadvantages, all its benefits and drawbacks, comparing it to other businesses and investment opportunities that I could invest my money in, how much would I pay for it”

If you answer this question without emotional attachment and honestly, you will find the answer to the biggest mystery for any business owner… the answer to real value of your business.

Zoran Sarabaca

Principal

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