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Archive for 'Preparing the Business for Sale' Category

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 […]

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 […]

What Due Diligence Documents Do Buyers Ask For?

By Hoke - Last updated: Sunday, August 8, 2010

Due Diligence is really about having the Buyer feel comfortable with the business acquisition. Each Buyer has a different threshold to feel enough comfort to buy the business. The amount of Due Diligence documentation is up to the Buyer and Seller. The actual Due Diligence List can be negotiated and mutually agreed as part of […]

Leases: A Cautionary Tale

By Hoke - Last updated: Friday, August 6, 2010

If you have decided to sell the business, why renew the lease? You have an “excellent” relationship with the Landlord. Here is a not so uncommon cautionary tale. Ready to retire, the Seller put his excellent, very profitable, key location retail business on the market. The Business was valued at about $600,000. He reasoned that […]

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.

Who is the best Buyer for A Business?

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

In most cases your ongoing business will present the most value to a new First Time Business Buyer. They will need training and will respect the Business Seller’s expertise. More experienced, Industry Insiders may only value the Customer List, disregarding the Employees and Equipment. The Industry Outsider Buyers greatly outnumber Industry Insider Buyers creating a […]

I can’t reduce my price because I will lose money.

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

A too-high price that doesn’t sell is an illusion that can end poorly if the Business Seller really must sell.