Archive for August, 2010

Key Factor Analysis Method Of Business Valuation

By Hoke - Last updated: Thursday, August 5, 2010

Key Factor Analysis is a common means to value a business (others include Historical Comparisons and Business Broker Local Estimate). There are a variety of Key Factor Analysis models using computer programs or as simple as handwritten calculations. First the Income Statement is recast to arrive at Recast Discretionary Income. Then the Recast Discretionary Income […]

Bigger Versus Smaller Business Brokerage?

By Hoke - Last updated: Tuesday, August 3, 2010

Business Brokerage being a person-to-person rather than team-to-team endeavor, the experience and skill of the individual Business Broker rather than size of team is the key determining factor in the success of a transaction. Although larger Business Brokerages have a bigger footprint and theoretically more exposure, because of high agent turnover in a straight-commission job […]

What Are Typical Seller Financing Terms?

By Hoke - Last updated: Tuesday, August 3, 2010

Seller Financing can be custom-fit to any situation. However, if one were to generalize or express an average it would be about a 5 year term with 6% to 9% APR.

Restaurant Acquisition Loans For Buyers With No Restaurant Experience

By Hoke - Last updated: Tuesday, August 3, 2010

Most Commercial Banks will not provide SBA Business Acquisition Loans for restaurants. Some will lend only if the buyer has years of restaurant experience, usually as a restaurant owner. Although it seems to be, “No restaurant lending” is not an SBA policy but is a decision made by the individual lenders. After dozens of phone […]

The Leveraged Acquisition

By Hoke - Last updated: Tuesday, August 3, 2010

[box type="download"] Here is a great example of a leveraged acquisition. This one has a $1 Million Acquisition cost. The Buyer put about 20% down. The balance of the funding came from an SBA Business Acquisition Loan and Seller Financing of about 15%. The Seller received about 85% of the Sale Proceeds in Cash. The […]

What Is An Earn Out? How Is It Used?

By Hoke - Last updated: Sunday, August 1, 2010

An Earn Out is a Note or Contract with variable payments. The payments are usually a Percent of Revenues over a fixed period for usually a fixed maximum. It can be used to provide the Business Seller with a higher potential Purchase Price if the business performs well, or conversely reducing the potential Purchase Price […]

What are typical questions Business Buyer’s ask?

By Hoke - Last updated: Sunday, August 1, 2010

1. What is the age of this business? 2. What are the Revenues for the previous three years? 3. Are the Revenues and Profit shown on the Financial Statements and Tax Returns? 4. Will the Financial Statements and Tax Returns correlate with the Bank Statements? 5. If no to #3 and #4 above, how can […]

What Are The Key Adjustments To Recast Discretionary Income?

By Hoke - Last updated: Sunday, August 1, 2010

The main Adjustments are: 1. Owner’s Salary 2. Interest 3. Depreciation 4. Amortization 5. Owners Perks 6. Non Recurring Expenses The above items are typically added to Discretionary Income. Proper Recasting the Income Statements is very important. Understating the Recast will leave “money on the table”. Overstating the Recast creates an unpleasant surprise or can […]

How Much Will The Ask Price Be Discounted During Negotiations?

By Hoke - Last updated: Sunday, August 1, 2010

This is really a case-by-case matter. The Published Average for Business Acquisition Sell Price as a Percent of Ask Price is approximately 85 – 88 Percent.

When should Escrow open?

By Hoke - Last updated: Sunday, August 1, 2010

Typically Escrow opens after the Business Buyer and Business Seller complete Due Diligence.