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Archive for 'Business Valuation' Category

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.

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 […]

Why do Business Brokers get 10% and Real Estate Brokers get 6%

By Hoke - Last updated: Sunday, August 15, 2010

Ten Percent is the longstanding traditional Business Brokers Commission. Why? It’s the Market Fee that almost everyone else charges.  Why do Real Estate Brokers get 6%? It’s the Market Fee that almost everyone else charges. Is 10% too high? Aside from the required Accounting and Financial background, here is our take on this issue. The […]

Minimum Broker Fees

By Hoke - Last updated: Sunday, August 15, 2010

Because Business Sale transactions values can sometimes go below $50,000 most Business Brokers charge a Minimum Fee that ranges from $5,000 to $15,000. The Minimum Fee is typically described in a sentence that states “… 10% of the transaction amount or the Minimum Fee whichever is higher”.

Historical Comparison Method of Business Valuation

By Hoke - Last updated: Saturday, August 7, 2010

This method relies on Actual Historical Sales Comparisons or ” Sales Comps” of similar businesses. Our favorite three sources of Historical Sales Comps are Pratt’s Stats, Bizcomps, The Business Reference Guide and the Bizbuysell Valuation Report. Pratt’s Stats and Bizcomps are the most comprehensive. The Business Reference Guide and the Bizbuysell Valuation Report also provide […]

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 […]

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.

What is an “Automatic” Business?

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

Like the proverbial money tree, the Automatic Business makes money steadily and regularly. These are the most desirable form of small business. The Profits of an Automatic Business are not proportionate to the amount of effort the Owner exerts. The Owner may do little work. Some established retail stores, manufacturers and wholesalers could be classified […]