Considering All of Your Business Real Estate Options

March 20, 2025 By

In a recent December 2018 article in Divestopedia entitled, “Options for Business Real Estate When Selling a Company,” the topic of business real estate was explored at length.

One of the key points of the article was that understanding one’s business real estate options would ultimately help in achieving “the goals desired in a transaction.”  The article is correct to point out that many, or even arguably most, business owners simply don’t know what real estate options are available to them when it comes time to sell the company.

In particular, there are two big options:

  1. Sell everything including the real estate.
  2. Hold onto the real estate for the rental income.

In the Divestopedia article, the authors correctly point out that if you, as the business owner, personally own the real estate in a separate entity, then you are good to go.  You should have a “clear path to valuation.”

However, if your company owns the real estate, then things get a little more complicated.  If this is the situation you’ll want to have a third-party appraisal of the real estate so that its value is clear.  The article also points out that if your business is a C-Corp and your business also owns the real estate, then it’s a good idea to talk to your accountant as there will be differences in taxation.

Every situation is different.  Many buyers will prefer to acquire the real estate along with the business.  On the other hand, many buyers may prefer a lease, as they don’t want everything that comes along with owning real estate.  Communicating with the buyer regarding his or her preference is a savvy move.

Now, as Divestopedia points out, if you do plan to retain the building, then you’ll want to be certain that a strong lease is in place.  Ask any business broker about the importance of having a strong lease, and you’ll get some pretty clear-cut feedback.  Namely, you always want to have a strong lease.

Issues such as who repairs what and why should all be spelled out in the lease.  It should leave nothing to chance.  One of the best points made in the Divestopedia article is that you will want a strong lease for another key reason.  When the time comes to sell the property, you want to show you have a lease that is generating good income.

Real estate and the sale of your business are not one-dimensional topics.  There are many variables that go into selling when real estate is involved.  It is important to consider all of the variables and work with a business broker who can help guide you through this potentially complex topic.

Copyright: Business Brokerage Press, Inc.

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Filed Under: Seller Articles, Seller FAQ, Selling a Business

Determining Your Company’s Undocumented Value

March 20, 2025 By

Business appraisals are not one-dimensional.  In fact, a good business appraisal is one that factors in a wide range of variables in order to achieve an accurate result.  Indisputable records ranging from comparables and projections to EBITDA multiples, discount rates and a good deal more are all factored in.

It is important to remember that while an appraiser may feel that he or she has all the information necessary, it is still possible they have overlooked key information.  Business appraisers must understand the purpose of their appraisal before beginning the process.  All too often appraisers are unaware of important additional factors and considerations that could enhance or even devalue a business’s worth.

There Can Be Unwritten Value

Value isn’t always “black and white.”  Instead, many factors can determine value.  Prospective buyers may be looking at variables, such as profitability, depth of management and market share, but there can be more that determines value.

Here are some of the factors to consider when determining value: How much market competition is there?  Does the business have potential beyond its current niche?  Are there a variety of vendors?  Does the company have easy access to its target audience?  At the end of the day, what is the company’s competitive advantage?  Is pricing in line with the demographic served?  These are just some of the key questions that you’ll want to consider when evaluating a company.

There are Ways to Increase Both Valuation and Success

No doubt, successful businesses didn’t get that way by accident.  A successful business is one that is customer focused and has company-wide values.  Brian Tracy’s excellent book, “The 100 Absolutely Unbreakable Laws of Business,” notes that it is critical for businesses to have a company-wide focus on three key pillars: marketing, sales and, of course, revenue generation.  Tracy also points out that trends can be seen as the single most vital factor and bottom-line contributor to any company’s success and, ultimately, valuation.  For 2018 and beyond, projected trends include an increase in video marketing, the use of crowdfunding as a means of product validation and more.

No Replacement for Understanding Trends

If a company doesn’t understand trends, then it can’t understand both the market as it stands and as it may be tomorrow.  Savvy business owners understand today’s trends and strive to capitalize on the mistakes of their competitors while simultaneously learning from their competitors’ successes.

Tracy accurately states that while there are many variables in determining value, finding and retaining the best people is absolutely essential.  One of the greatest assets that any company has is, in the end, its people.

Copyright: Business Brokerage Press, Inc.

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Filed Under: Buying a Business, Seller Articles, Selling a Business

Obtaining a Fair Market Value for Your Business

March 20, 2025 By

Divestopedia published a rather insightful article, “Letting the Market Bridge the Valuation Gap.”  In this October 2018 article, Dave Kauppi dives in and explores how fair market value can be used as a way for business owners to “bridge the gap between the valuation they feel they deserve and that which they’re likely to receive.”  This, of course, increases the chances of a deal actually taking place.  Let’s turn our attention to some of the key points in Kauppi’s informative article.

Understanding the Reality of Selling a Business

One key point is that only a low percentage of businesses actually sell on their first attempt.  The article points out that a mere 10% of businesses that are for sale are actually sold three years later; this is a simply brutal fact.  Few facts, if any, help underscore the value of working with a business broker more than this point.  Selling a business can be difficult under even the best of circumstances.  The process is complex, and most sellers have never actually sold a business before.

Divestopedia believes that it is critical for business owners to have realistic expectations regarding valuation.  As the article points out, the market doesn’t care “how much money you need for retirement,” or how much you’ve invested.

Four Points to Consider

According to the article, it is important that business owners understand that a few business characteristics will ultimately drive the sale.  There are four key factors to consider: contractually recurring revenue, durable competitive advantage, growth rate and customer concentration.

There is a lot packed into these four points, but here are a couple of big takeaways.  In terms of customer growth, if a large percentage of your business is derived from a single customer, then that is going to be seen as a problem.  As Divestopedia points out, if your company is dependent and partially dependent on a single customer, then you can expect a lot of pressure for you, as the business owner, to stick around a lot longer to ensure that this key customer isn’t lost.  If intellectual property, such as software, is involved, then things can get even more complex.  In the end, determining value in technology-based companies can be more challenging.

In the end, working with a seasoned business broker, one that understands valuation and how best to get there, is a must.  You want to receive the best possible price for your business.  An experienced business broker will help you understand how to navigate the complex process of determining a price.  However, and most importantly, a business broker will help you achieve a fair market value, so that your business doesn’t remain unsold for years.

Copyright: Business Brokerage Press, Inc.

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Filed Under: Seller Articles, Selling a Business

5 Big Questions to Consider when Financing a Business Sale

March 20, 2025 By

How should the purchase of a business be structured?  This is a point that you’ll want to address early in the sale process.  For most people, buying or selling a business is one of the most, if not the most, important business decision that they will ever make.  For this reason, it is vital not to wait until the last minute to structure your deal. Let’s turn our attention to the most significant questions that you need to answer when entering the sales process.

1. What is My Lowest Price?

The first question you should ask yourself is, “What is the lowest price I’m willing to take?”  If an offer is made, the last thing you want is to be sitting around trying to decide if you can take a given offer at a given price.  You need to be ready to jump if the right offer is made.

2. What are the Tax Implications?

Secondly, you’ll want to seriously consider the tax consequences of any sale.  Taxes are always a fact of life and you need to work with a professional, such as an accountant or business broker, to understand the tax implication of any decision you make.

3. What are the Interest Rates?

The third factor you want to consider is interest rates.  If you get a buyer, what is an acceptable interest rate for a seller financed sale?

4. Are there Additional Costs Involved?

A fourth key question to ask yourself is do you have any unsecured creditors that have not been paid off?  Additionally, you’ll also want to determine whether or not the seller plans on paying for a part of the closing costs.

5. Will the Buyer Need to Assume Debt?

Finally, will the buyer need to assume any long-term or secured debt?  The issue of long term and/or secured debt is no small issue. Be sure to clarify this important point well in advance.  Also keep in mind that favorable terms typically translate to a higher sales price.

Business brokers are experts at buying and selling all kinds of businesses.  When it comes time to structure a deal that benefits both the buyer and the seller, business brokers can prove to be invaluable.  At the end of the day, working with a business broker is one of the single biggest steps you can take to ensure that your business is sold and sold as quickly as possible.

Copyright: Business Brokerage Press, Inc.

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Filed Under: Seller Articles, Selling a Business

A Look at Divestopedia’s Article, “The Myth of Fair Business Valuation”

March 20, 2025 By

In Divestopedia’s article, “The Myth of Fair Business Valuation: What Professional Valuations Don’t Tell You,” author Chak Reddy is quick to point out that the “type of buyer and method of sale are two important (yet often overlooked) value determinants when finding a starting price for your business.”

Reddy brings up some excellent points.  One notion in particular that every business owner should be aware of is that there is “NO fair value for illiquid assets.”  He points to the fact that between January 2007 and March 2008, the historic Bear Stearns went from a value of $20 billion dollars to just $238 million.  In a mere 14 months, Bear Stearns lost most of its value.

Additionally, the article points to the fact that business owners often suffer enormously from “dramatic valuation compression.”  In Reddy’s view, this compression is the direct result of poor planning and a failure on the part of business owners to select the right advisory teams.

Reddy believes that professional valuations can be quite lacking.  He feels that they are “contingent on multiple assumptions,” and that the valuations are only as good as the assumptions upon which they are based.  In other words, professional valuations can be limited and flawed.  In particular, he points to the fact that two of the most important factors in valuations, future growth rate and operational synergies are “highly subjective and no two views on these topics are likely to be identical.”  Summed up another way, valuations are inherently a matter of opinion and perspective.  Reddy feels that a seller will be “lucky” if the real sales price comes within 10% to 20% of the professional valuation.

In the end, as always, it is the market that determines value. It is the acquirer who will determine the value more than any other factor.  The perception of the buyer will play a key role in the process and, further to the point, no two buyers will perceive the business exactly the same way.  In other words, valuations can be tricky and certainly do involve a personal element of the individual who is appraising the business’ value.  Adding to this point, Reddy states, “From our experience, the type of buyer and the type of sale skew the valuation to such an extent that it is unwise for a business owner to not be familiar with these variables and their impact before the beginning of the sales process.”

Ultimately, finding the right buyer is essential and this is where a business broker can prove simply invaluable.  And finding that right buyer may take time.

Copyright: Business Brokerage Press, Inc.

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Filed Under: Seller Articles, Selling a Business

The Top Three Major Legal Mistakes to Avoid During a Sale

March 20, 2025 By

The business sale process can be complex, which is part of the reason why it makes sense to have expert help in the form of a business broker.  Legal mistakes can be very costly mistakes.  A legal mistake can also bring the entire sale process to a sudden and complete halt.  Let’s take a closer look at what you can do to avoid these kinds of issues when selling your business.

Major Mistake 1 – You Skipped the Non-Disclosure Agreement

Nothing quite invites trouble like skipping the non-disclosure agreement.  If a deal falls through, then you have the NDA backing you up.  This document ensures that the prospective buyer doesn’t tell the world that your business is up for sale.  Never assume that a deal is going through until it actually is 100% complete.  Buying or selling a business is a complex process with lots of moving parts.  There is plenty of room for things to go wrong, and that is why you always need to have an NDA in place.

Major Mistake 2 – You Don’t Work with an Attorney

Let’s be very blunt here, if you are selling a business, then you need an attorney.  Just as there is no replacement for an NDA, the same holds true for working with a lawyer.  It is also vital that you properly prep your business for sale, which means getting paperwork organized and making sure that you have legally checked all your boxes.  Working with an experienced and proven attorney will help you ensure that your business is ready for sale.  If you’re not prepared for the deal, it can make buyers nervous.

Major Mistake 3 – You Failed to Get a Letter of Intent

A letter of intent is a valuable, and necessary, legal document.  Some sellers are reluctant to use it, fearing that it will slow down the momentum of the deal.  However, since this letter works to protect your interest and outlines expectations, this step should not be skipped.  For example, a letter of intent details the termination fee for the buyer, meaning that the buyer can’t walk away without consequences simply because he or she is having a bad day.  Importantly, a letter of intent ensures that you are only dealing with serious buyers.

Many things can go wrong while selling a business.  The more prepared you are before you begin the process, the greater the chances that you will not only avoid headaches, but also be successful.  Long before you put your business on the market, you should begin working with a capable business broker and attorney.  Their input and advice will prove to be invaluable and help you avoid a range of costly and time-consuming issues.

Copyright: Business Brokerage Press, Inc.

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Filed Under: Seller Articles, Seller FAQ, Selling a Business

Goodwill and Its Importance to Your Business

March 20, 2025 By

What exactly does the term “goodwill” mean when it comes to buying or selling a business?  Usually, the term “goodwill” is a reference to all the effort that a seller puts into a business over the years that he or she operates that business.  In a sense, goodwill is the difference between an array of intangible, but important, assets and the total purchase price of the business.  It is important not to underestimate the value of goodwill as it relates to both the long-term and short-term success of any given business.

According to the M&A Dictionary, an intangible asset can be thought of as asset that is carried on the balance sheet, and it may include a company’s reputation or a recognized name in the market.  If a company is purchased for more than its book value, then the odds are excellent that goodwill has played a role.

Goodwill most definitely contrasts and should not be confused with “going concern value.”  Going concern value is usually defined as the fact that a business will continue to operate in a fashion that is consistent with its original intended purpose instead of failing and closing down.

Examples of goodwill can be quite varied.  Listed below are some of the more common and interesting examples:

  • A strong reputation
  • Name recognition
  • A good location
  • Proprietary designs
  • Trademarks
  • Copyrights
  • Trade secrets
  • Specialized know-how
  • Existing contracts
  • Skilled employees
  • Customized advertising materials
  • Technologically advanced equipment
  • Custom-built factory
  • Specialized tooling
  • A loyal customer base
  • Mailing list
  • Supplier list
  • Royalty agreements

In short, goodwill in the business realm isn’t exactly easy to define.  The simple fact, is that goodwill can, and usually does, encompass a wide and diverse array of factors.  There are, however, many other important elements to consider when evaluating and considering goodwill.  For example, standards require that companies which have intangible assets, including goodwill, be valued by an outside expert on an annual basis.  Essentially, a business owner simply can’t claim anything under the sun as an intangible asset.

Whether you are buying or selling a business, you should leverage the know how of seasoned experts.  An experienced business broker will be able to help guide you through the buying and selling process.  Understanding what is a real and valuable intangible asset or example of goodwill can be a key factor in the buying and selling process.  A business broker can act as your guide in both understanding and presenting goodwill variables.

Copyright: Business Brokerage Press, Inc.

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Filed Under: Buyer Articles, Buying a Business, Seller Articles, Selling a Business

Evaluating Your Company’s Weaknesses

March 20, 2025 By

The time you spend evaluating your company’s weaknesses is, as it turns out, one of the single best investments you can hope to make.  No one should understand your company better than you.  But to fully understand your company, it is essential that you invest the time to understand your company’s various strengths and weakness.

Your company, from the beginning, has been an investment.  It’s an investment in your time, your mental energy and, of course, your financial resources.  The time and effort you expend to locate, understand and then fix your businesses’ weaknesses is time very well spent.  Addressing and remedying your businesses’ weakness will not only pay dividends in the here and now, but will also help get your business ready to sell.  Let’s turn our attention to some of the key areas of weakness that can cause some buyers to look elsewhere.

An Industry in Decline

A declining market can serve as a major red flag for buyers.  You as a businessowner must be savvy enough to understand market situations and respond accordingly.

If you spot a troubling trend and realize that a major source of your revenue is declining or will decline, then you must branch out in new directions, offer new goods and/or services, find new customers and also find new ways to get your existing customers to buy more.  Taking these steps shows that your business is a vibrant and dynamic one.

You Face an Aging Workforce

It has been well publicized that young people, for example, are not entering the trades.  Many trades such as tool and die makers will be left with a substantial shortage of skilled workers as a result.  No doubt, technology will replace some, but not all, of these workers.

This is an example of how an aging workforce can impact the health and stability of a business.  If your business potentially relies upon an aging workforce then it is essential that you find a way to address this issue long before you put your business up for sale.

You Only Have, or Primarily Rely Upon a Single Product

Being a “one-trick pony” is never a good thing, even if that trick is exceptionally good.  Diversification increases the chances of stability and can even help you find new customers.  Additional goods and services allow you to weather unexpected storms such as a supply chain disruption while at the same time provide access to new customers and thus new revenue.

The Factor of Customer Concentration

Many buyers are concerned about customer concentration.  If your business has only one or two customers, then your business is highly vulnerable and almost every prospective buyer will realize this fact.  While it is an investment to find new customers, it is well worth the time and money.

A business broker can help you evaluate your company and, in the process, address its weaknesses.  Remedying your businesses weakness before you put your business up for sale and you will be rewarded.

Copyright: Business Brokerage Press, Inc.

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Filed Under: Seller Articles, Selling a Business

When It’s Time to Sell, Put Your Strengths First

March 20, 2025 By

Putting your strengths first will help you sell your business.  While this may seem obvious, a surprising number of business owners will either improperly index the strengths of their business or fail to emphasize those strengths adequately.  In this article, we will examine five key business strengths that you should focus on when it comes time to sell.

Understand Your Buyer

You know your business, but you don’t necessarily know what buyer is best for it in the long run.  If you’ve never sold a business before (and most business owners haven’t), then you may not know how to best position and present your business for sale.

A business broker is immensely valuable in this regard.  These professionals are very good at determining which prospective buyers are serious and which ones are not.  Additionally, a business broker will use their own databases of prospective and vetted buyers and try to match your business up with the prospective buyers that are most likely to be a good fit.  When dealing with a buyer, a seasoned business broker will put emphasis on your strengths whenever possible.

Be Sure to Maintain Normal Operations

Selling a business can be very demanding and underscores, once again, the value of working with a business broker.  A business broker will focus on selling your business so that you have more time to focus on the day-to-day of running your business.

The last thing you want is to waste your time on buyers who are not serious.  Remember, if your business suffers as a result of the time you spend away from your business in the sale process, then the value of your business to prospective buyers could suffer.

Determining the Best Price

If you incorrectly price your business, you could dramatically reduce the interest.  Business brokers are experts at pricing businesses and can help you determine the best possible price.  Many business owners have unrealistic valuations and others may even undervalue their businesses or they fail to incorporate all aspects of their business.  Working with a professional business broker can help you quickly achieve the best price.  The best price possible will work to maximize the strengths of your business.

Getting Your Business Ready for Sale

There is a lot that goes into getting your business ready to sell.  The simple fact is that getting your business ready to sell isn’t a one-dimensional process, but instead involves every aspect of your business.  Getting your business ready to sell isn’t about making it look presentable and putting a “new coat of paint” on things, although this is a factor.

Instead it is necessary to have every aspect of your business in order.  From paperwork such as tax returns, contracts and forms to a business plan and more, it is important to consider every aspect of your business.  You should consider what you would want to see if you were the one looking to buy the business.  Be sure to do everything possible to build up your strengths.

Confidentiality

If word gets out that your business is up for sale, there could be a range of problems.  Employees, including key management, could begin looking for other jobs and suppliers and key buyers could begin to look elsewhere.  In short, a breach of confidentiality could lead to chaos.

Getting your business ready for sale means factoring in the strengths and weakness of your business then fixing weaknesses whenever possible and building upon your strengths.  Working with a business broker can help you address every point covered in this article and more.

Copyright: Business Brokerage Press, Inc.

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Filed Under: Seller Articles, Selling a Business

New Year’s Resolutions & Selling Your Business

March 20, 2025 By

Most people fail to keep their New Year’s Resolutions.  But where buying and selling a business is concerned, failing to keep those resolutions could mean an abundance of lost opportunity.

Todd Ganos at Forbes recently penned a thought-provoking article entitled The 8 New Year’s Resolutions for the Sale of Your Business.  In this article, he compares selling a business to getting in shape in the months preceding your visit to the beach.  It is necessary to do a great deal of planning and hard work if you want to be in good shape for the big “beach body reveal.”

When it comes to selling a company, Ganos believes that there are eight factors that must be taken into consideration.  Listed below are those factors he feels are a must for business owners looking to get their business ready for “the beach.”  These are the eight factors that Ganos believes are most essential and should be on your New Years’ Resolution list for your business:

  1. Planning
  2. Legal
  3. Leadership
  4. Sales
  5. Marketing
  6. People
  7. Operations
  8. Financial

In order to get your business ready, it is necessary to take a good long and honest look at each of these eight important categories.

Planning is at the heart of everything.  He points out that owners who truly want to get their business ready for the market will want to adopt a focused month-by-month plan.

This plan means having discipline, developing a business plan and involving your team in the development of that plan.  Once the plan has been developed, it should be reviewed with your leadership team each month.

New Years’ Resolutions fail because they don’t get properly integrated into peoples’ lives.  And the same holds true for making changes in one’s businesses.  Ganos correctly asserts that in order to get your business ready to sell, you have to make it an “all-of-the-time thing” in which you are constantly focused on success.

New Years’ Resolutions have to be about doing things differently, having a plan and then sticking to these changes permanently.

Copyright: Business Brokerage Press, Inc.

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Filed Under: Seller Articles, Selling a Business
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