Archive for '1. HOW TO SELL A BUSINESS' Category

SBA Lender “Bait and Switch” : A Nasty Practice

By Hoke - Last updated: Tuesday, October 27, 2015

The SBA guarantees 75% of a Business Acquisition Loan. If the Buyer can make a 25% Cash Down Payment, in the event of a default, the Lender can collect the entire loan balance from SBA. It has no risk of cash loss. As written, the SBA program is wonderful and very helpful. However, Lenders have […]

Some Brokers Make Money by NOT Selling Anything: A Nightmare Tale…

By Hoke - Last updated: Wednesday, November 19, 2014

I all starts very innocently with wording in the broker’s Representation Agreement “in the event of an escrow default by buyer, the escrow proceeds are split equally between broker and seller”. This is how the nightmare begins… Think about this. Now the broker now makes five times more money (50%) in the event of an […]

Broker Pressure Tactic: “There are Other Buyers Interested!”

By Hoke - Last updated: Sunday, February 9, 2014

Use of ” There are Other Buyers Interested!” is a grossly overused broker tactic. Some brokers say this with an air of great urgency to every buyer as a knee jerk reaction. Sellers often encourage brokers to use this tactic. We discourage use of this tactic when no other buyers exist. First of all, how […]

Raising Prices Prior to Listing the Business for Sale Increases the Sale Price

By Hoke - Last updated: Wednesday, January 29, 2014

                [box] If you can, raising your product prices before the sale is a great way to increase the discretionary income and therefore the sales value of the business. The prices should be raised with enough time (2-3 months) that any customer reaction because of the price changes […]

Historical Comparisons or Key Factor Analysis, Which Business Valuation Method To Use?

By Hoke - Last updated: Tuesday, January 7, 2014

Key Factor Analysis and Actual Historical Sale Price Comparisons will give a range of slightly different Multiples. From this range, one can add local expertise and decide what Multiple to use, and what the initial Ask Price should be.

Good Faith Deposit / Beware of Broker Trust Accounts

By Hoke - Last updated: Friday, January 3, 2014

A Good Faith deposit is often required to accompany the offer. The amount is typically 10% to 20% of the sale price. Because it is impossible to really really know if the sellers claims are valid without solid verification, most reputable business brokers will hold the Good Faith Deposit uncashed until Due Diligence is successfully […]

What is Due Diligence?

By Hoke - Last updated: Monday, September 3, 2012

Due Diligence part of the sale process when the seller opens all aspects of the business to the buyer. In essence this is where the seller must convince the buyer that the business performs and is as represented. This convincing is done mostly via providing historical documentation and buyer observation. The buyer has an opportunity […]

Business Broker Industry Fees

By Hoke - Last updated: Monday, September 3, 2012

Business Broker fees are set by the individual Business Broker firm and vary. Most firms work on a “Success Fee” where they earn a fee only if the transaction closes. Commission is typically paid from the sale proceeds. Some firms require an upfront retainer fee. Although there are exceptions, the Commission Percent charged averages about […]

Pricing the Potential of a Business

By Hoke - Last updated: Saturday, September 1, 2012

I have a saying: The buyer buys a business that shows potential but pays for history.” If the buyer does not see growth potential, the buyer will usually not buy it. The buyer may see a potential but doesn’t let anyone know. As an example the buyer may be a marketing expert and sees an […]

Financial Due Diligence Checklist

By Hoke - Last updated: Saturday, September 1, 2012

This typical list is complete and detailed. Many smaller businesses may not have available this depth of detail. Bank Statements for the for past three years Cash Receipts Journals for the for past three years General ledgers for the for past three years Cash disbursement journals/check registers for the for past three years Copies of […]