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Issue #10

If you are considering selling your business, we can help you get the maximum value for it. We will provide you with the special attention and professional services that you and your business deserve. We have the knowledge and experience to successfully market and sell your business.

Alpine Business Brokers is a local business brokerage affiliated with CENTURY 21 Harman Realty, Inc. We combine many years of business experience that provides you with a professional approach to selling your business.

We specialize in business sales. All consultations are strictly confidential.

Call us today: 801-224-8848

 

Businesses are selling and “now” may be a good time to consider selling. After all, owning one’s own business is still the great “American Dream.” However, several factors are pushing this demand. Following are some of the reasons why “now” might be a good time to sell.

There is always a demand for good, profitable businesses, but now the demand is even greater. Mergers, layoffs, consolidations, too much work being placed on a shrinking work force – all contribute to the ever-growing pool of potential business buyers.

The economic issues facing the country seem to be in a positive and upward trend. Inflation is still low and interest rates, while increasing, are still relatively low. Buyers can borrow against their house, for example, and at a very reasonable rate; the same is true for bank financing and guaranteed loans by the Small Business Administration (SBA), usually termed as “7a” loans. On the plus side for sellers, capital gains taxes are also low. Buyers can borrow more easily and pay less in interest, and sellers get a break on capital gains taxes.

he survey mentioned in this issue also revealed some interesting data on the average period between the day a business was listed for sale and the time in months it took to sell it. It should be noted that business brokers (the respondents to the survey) almost always will sell a business faster than an owner – and for more money.
In over 70 percent of the time, a business sold in less than nine months!

There is increasing evidence that many people who are currently employed are unhappy in their jobs. Benefits are declining and even disappearing, as is the time-honored retirement program. Many of these people are doing the work of two or three employees to make-up for company downsizing – all in the name of corporate profit. These people may begin to consider making their hard work pay off by owning their own business.

Business brokers know from experience that buying and selling activity increases when the economy is on the move, and most reports indicate that it is.
Sellers, however, better think twice before trying to cash-in by merely placing their business on the market. One thing buyers always want to know is – if this is such a wonderful business, why is the owner selling? Business owners should not even think about selling if there is no valid reason and all they want is to see how much they can get for their business.

If there isn’t a factor operating such as health, retirement, personal issues or genuine “burn-out,” the owner should wait until there is a legitimate reason to sell. In too many cases, terms are agreed upon, but because the seller is not truly ready for this step, he or she pulls out of the deal. However, if the seller is ready to sell and, if that time is now –all the better. For a confidential evaluation of your situation, call a professional business broker today.

A recent survey revealed the following percentage breakdown of last year’s business sales by business types. The information was furnished by business brokerage firms nationally and compiled by Business Brokerage Press.
Service type businesses include dry cleaners, quick print, video stores, etc. Other businesses include coin laundries, delivery services, product and vending routes, and any that don’t fit into the other categories listed.
What does this mean to you as a business owner? It indicates that service type businesses seem to be creating the most activity from business buyers, followed by retail and the food and drink sector. The service sector has also been the leader in businesses sold by business brokers for the previous two years. This coincides with the growth nationally in the service sector coupled with the broad range of businesses included in it.
The food and drink sector, which includes restaurants, fast-food, taverns and the like, has always been a popular one for buyers. One reason is that most people frequent these types of businesses on a regular basis and therefore are familiar with them. Plus, there has always been a certain “celebrity” status connected with this sector.
However, statistics aside, today’s buyer has more knowledge, experience and education than ever before and is willing to consider almost any type of profitable business.

he most recent editions of BizComps, the leading resource for comparable sales data (www.bizcomps.com ) has some interesting information on small business pricing based on the three major regions of the country – Eastern states, the Central states and the Western states. They cover thousands of actual business sales over a ten year period. Here is the breakdown
Using the Western states as the base, since that region of the country has the highest average price business, businesses in the Central states sell for 74 percent of the average price in the Western states; and the average price in the Eastern states is 78 percent of the Western states average.
 
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he buyer loves your business; it’s just what he or she has been looking for. He has reviewed your financial statements and has made an offer contingent on several items. You’ve reviewed the offer and it looks fine, so what’s next? The contingencies in the deal mean that the buyer or his or her advisors have some concerns. In larger deals, this process might be called due diligence. However, in the smaller business sale, the items of concern are usually spelled out as opposed to a general review of everything. The reason for this is that larger businesses or companies have a lot more areas of concern than the typical smaller business.
Most contingencies concern the review of financial statements and/or business tax returns. Others may involve lease issues, the seller staying on for a set period of time, or some very specific issue such as repaving the parking lot, if the landlord won’t or isn’t required to.
Unfortunately, some contingencies may be hiding other ones such as a list of fixtures and equipment included in the sale. Sounds easy on the surface, but the seller forgot that two pieces of equipment currently not in use need repair or the walnut desk in the office belongs to Grandfather Smith and is not included. Or, while reviewing the lease, the buyer discovers that the landlord requires that the business must close by 9:00 PM or some other restriction applies and was not disclosed. Deals have fallen apart over similar issues.

Most contingency problems can be resolved prior to the business being placed on the market. The seller should do all of the following:

Check the status of all furniture, fixtures and equipment
(FF&E). Remove any that are not included in the sale or are inoperable if not in use – or make repairs.

Review any contract such as the lease, any equipment leases, and contracts that will be assumed by the buyer. Make sure there aren’t “clinkers” in them. If there are, disclose them to a potential buyer out front – and be sure your business intermediary is also aware of them.
Be prepared to answer questions such as:
- Are there any environmental, governmental
or legal issues?
- How long will you be willing to stay and work
with a new buyer – at no cost?
- Will the employees stay?
- Why was last year the worst one in years?
- Why was last year the best one in years?
The list could go on and on, but sellers need to be ready. Buyers don’t like surprises. A business broker professional knows the process like a book and can be invaluable in preparing the business for the marketplace.

 

©2006 BBP - This newsletter is not intended to render accounting, legal or other professional service; the publisher and sponsors assume no liability for a reader’s use of the information herein.©Copyright 2006 Business Brokerage Press

 
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