Category: Selling Your Business

One of the more challenging things I do as a business broker is to present a business valuation to a client who thinks their business is worth more than it is. For years they worked hard at their businesses, putting in countless hours, dealing with employees and their issues, working through tight cash flow and all of the challenges a business owner faces. They were getting ahead and building value. During this time they bought cars, purchased homes and provided for their children s’ education. They supported their lifestyle through the business, and they have been looking forward to cashing out with enough money to fund their retirement. They didn’t stop to contemplate what drives the business sales value....

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What is your business worth? The short answer, of course, is whatever someone will pay for it. The longer answer is: it depends. It depends on your industry, it depends on your profitability. It depends on a multitude of factors. One of the valuation techniques being taught by the International Business Brokers Association is called the Multiple of Discretionary Earnings Method. It consists of 10 value drivers, each given a weighted score, that when combined estimates the multiple of earnings that a business would be valued at. These drivers include historical profitability, income risk, terms of sale, the business type, historical growth, location, marketability, desirability, competition and the industry....

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One of the key drivers of business value is the ability of a new owner to come in and build from where the old owner left off. Normally, the easier the transition, the higher the multiple of earnings the business values at. Everything else being equal, a business that can be run by management or even without owner involvement would have a higher multiple than, say, a single practitioner. For example, A business owner who does most everything himself may sell for a multiple of less than one times earnings, while an operation with a service staff and administrative support could sell for a multiple of 2 to 3 times earnings. This boils down to risk. The more reliant the business is on one person, the greater the risk. The more spread out the duties and responsibilities of running the business, the less the risk. Spread the work around to others, and increase business value through delegation....

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Is now the time to sell your business? More than 75 million baby boomers are nearing retirement age, and many of them own businesses. It’s no wonder that we have seen an increase in business sales over the last year. According to BizBuySell, 2013 small business sales were up close to 42% from the previous year, and that trend is expected to continue....

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Do you want to sell your business in the shortest time, for the most money? Here are some things to consider: In a normal market with the right preparation, it takes on average 8 to 10 months to sell a  business.  If the work isn’t done ahead of time the business may never sell.  To sell your business in the shortest time, for the most money:...

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