by Neal Isaacs, MBA, CBI, CM&AP | Exit Planning, Sell a Business |
Choosing the right intermediary or business broker to represent a business owner in the sale of their business can make all the difference when it comes to the right price, the right buyer, and the ability to close the deal.
by Eric M. Magister, M.A. in Law | Business Valuation, Exit Planning, Sell a Business |
At some point during a company’s existence, it’s very likely a business owner will need a business valuation. Regardless of the reason, it is very important to understand how business valuations are conducted.
by Eric M. Magister, M.A. in Law | Business Valuation, Sell a Business |
When all other factors are equal, the presence of a significant concentration among customers, suppliers, and/or employees results in a lower business value than might otherwise be expected due to the underlying inherent risks associated with any or all of these concentrations.
by Neal Isaacs, MBA, CBI, CM&AP | Business Valuation, Exit Planning, Grow a Business |
Buying and selling a business is a challenging and calculated process that is influenced greatly by market conditions. On one hand, business buyers must consider the historical performance of the business they intend to purchase and gauge that against financing options and other acquisition challenges to make a judgment call on how the business would perform post-acquisition. Business owners, on the other hand, must consider the money they are making now, and weigh that against a pay out and their need or desire to work less.
by Holly Magister, CPA, CFP® | Business Valuation, Exit Planning, Sell a Business |
Many business owners are uncertain about how to establish a value for their business, regardless of its stage of development. How to value ideas, start-ups and mature businesses differ greatly. Learn more.
by Holly Magister, CPA, CFP® | Business Valuation, Exit Planning, Sell a Business |
If you intend to grow and sell a valuable business, the Great Resignation that kicked off in mid 2021 means everything. Everything that is if you care about the value of your business.
by Neal Isaacs, MBA, CBI, CM&AP | Business Valuation, Exit Planning, Grow a Business, Sell a Business |
Business owners who address the three hallmarks of a valuable business are very likely to have more options for exit and attract multiple buyers.
by Holly Magister, CPA, CFP® | Exit Planning, Sell a Business |
Learn about the three phases in a business exit plan and why each is important for the business, its employees, the owner and his or her family. This post includes our most popular FAQs on this topic as well. Wondering about the Exit Planning designations for professional advisors? We’ve covered that in this post as well.
by Holly Magister, CPA, CFP® | Business Valuation, Sell a Business, Selling a Business Questions |
When it comes to the sale of a business, there are a number of costs – both expected and unplanned – all business owners should understand before they agree to sell their business. A few of our Featured Advisors have weighed in, offering their expertise and perspective to explain the costs – from business broker fees and legal costs to hidden fees – as they relate to selling a business.
by Neal Isaacs, MBA, CBI, CM&AP | Exit Planning, Sell a Business |
As an intermediary, I have many conversations with business owners about how much their business is worth. As these conversations progress, owners realize that it’s not how much they make, it’s how much they can keep that truly matters.
by Neal Isaacs, MBA, CBI, CM&AP | Business Valuation, Sell a Business |
The COVID 19 Era has begun. In addition to lives lost, there’s an economic toll that has yet to be determined at the time this content is being written. With small businesses on life support, these are scary times for business owners and for the intermediaries helping owners navigate through them. So how has COVID 19 affected business transactions?
by Neal Isaacs, MBA, CBI, CM&AP | Business Valuation, Exit Planning, Sell a Business |
As a business intermediary helping owners determine the “Most Probable Sales Price,” or MPSP of their businesses here in the Triangle, I hear a common question:
“That value makes sense, but what about all my stuff? Can I get paid for that too?”
The answer is rarely what the business owner wants to hear, but there’s a sound reason for it, and understanding how businesses are priced can help an owner with decisions on how to allocate resources for assets; especially if they are planning to sell in the near future.
In this article, we’ll explore the market approach for small businesses and what value the assets carry…
by Eric M. Magister, M.A. in Law | Business Valuation, Exit Planning, Sell a Business |
Quite simply, a business valuation is a process and set of procedures used to determine what a business worth. Sounds unambiguous, right? But it takes more than just plugging numbers into a formula — a credible business valuation requires knowledge, preparation, and...
by Neal Isaacs, MBA, CBI, CM&AP | Business Valuation, Exit Planning, Grow a Business, Sell a Business |
Doing deals can be expensive. A lot of entrepreneurs want to save money by not hiring an advisor or they don’t know when they should make the investment on an advisor. It’s important to understand the roles of the broker and other advisors, especially legal counsel, and to know when to bring in a professional. Here are some milestones in a deal, and how to know when to hire a business advisor.
by Holly Magister, CPA, CFP® | Business Valuation, Exit Planning, Sell a Business, Selling a Business Questions |
One of the greatest risks any buyer faces is what will happen to the business’ best customers post-sale. Will the top customers celebrate the founder’s great accomplishment or maybe decide it’s a good opportunity to negotiate better pricing or payment terms with the new owner? Or worse yet, will they be spooked by the new owners and find an alternative vendor?
Astute buyers measure this risk quickly. Typically, one of the first questions experienced buyers ask the business broker is about the presence or lack of a customer concentration.
For the business owner considering the sale of his business in the near future, having a clear understanding if a customer concentration exists is vitally important. In fact, the lack of a customer concentration is a great selling point.
by Eric M. Magister, M.A. in Law | Business Valuation, Exit Planning, Sell a Business |
Depending on the circumstances and objective of the owner, the value of a business can vary considerably. For instance, upon sale to unrelated party, an owner would expect to receive the maximum purchase price for their business the unrelated party is willing to pay. However, that same sale to a family member or employee may need to be structured so the cash flow of the business can support the purchase price.
For a closely held business, owners generally have little idea about the value of their business, or whether their business is generating an adequate return on investment, and what drives its value.
by Neal Isaacs, MBA, CBI, CM&AP | Business Valuation, Exit Planning, Sell a Business |
A Broker’s Opinion of Value, or BOV, can help an owner determine what the business would sell for on the open market. This, in relation to an owner’s “pain” level, are often enough to make a decision if they are ready to sell.
by Holly Magister, CPA, CFP® | Business Valuation, Grow a Business, Trepopedia |
v Have a Question? Add it to the bottom of this post! For many entrepreneurs, launching a new business often means walking a fine line between pursuing earnings growth and growing the top-line revenue. A business can’t be successful in the long-term without earning a...
by Holly Magister, CPA, CFP® | Business Valuation, Exit Planning, Grow a Business, Trepopedia |
Contribution margin is an important method of not only understanding how profitable a business is, but also how its products and services contribute to the bottom line. It’s important to understand that contribution margin is different from profit margin, since profit...
by Holly Magister, CPA, CFP® | Business Valuation, Sell a Business, Trepopedia |
v Have a Question? Add it to the bottom of this post! When a business is sold, sometimes an adjustment to the purchase price is needed to make up any difference between available working capital at the time of closing, and the working capital needed to maintain...
by Holly Magister, CPA, CFP® | Sell a Business |
There are many ways to compute the value of a business, and an equal number of differing opinions regarding a particular methodology’s relevance to an entrepreneur who starts and grows a viable business. But what seems to truly matter most to the entrepreneur who has...
by Andrew N. Jones | Sell a Business |
As consumers, we’ve become increasingly familiar with the notion of paying a monthly fee for various business and lifestyle services. Whereas we once rented movies by the title by driving to Blockbuster, we now have access to virtually unlimited content on Netflix....
by Holly Magister, CPA, CFP® | Business Valuation, Sell a Business |
EBITDA Margin and Adjusted EBITDA Margin are similar measurements used by business owners and others who value businesses for sale. Let’s break down the two terms to help your understand which measurement of profit and cash flow are most relevant for your...
by Holly Magister, CPA, CFP® | Grow a Business, Sell a Business |
How could there be risks in your business relationships? For most business owners who’ve started a business from scratch, the notion of regarding as risky the many positive relationships they’ve built over the years with customers, vendors, and even employees is...
by Holly Magister, CPA, CFP® | Grow a Business, Sell a Business, Trepopedia |
Book Value is defined as the total value of a company if it were to liquidate its assets and pay back its liabilities, or the value of the company according to the financial statement. Book value (BV) is also sometimes referred to as “shareholder’s equity.” Business...
by Holly Magister, CPA, CFP® | Sell a Business, Trepopedia |
Have a Question? Ask your question below and one of our Advisors will answer. What is Invested Capital? MVIC (Market Value of Invested Capital) is the amount of money raised by issuing securities to shareholders and bondholders, and typically includes total debt and...
by Holly Magister, CPA, CFP® | Business Valuation, Sell a Business, Trepopedia |
The discount rate can be defined in several ways. For purposes of this post, the discount rate will be defined as it relates to small and medium sized businesses (SMBs) and the Discounted Cash Flow (DCF) valuation method. As it applies to a business investment...
by Holly Magister, CPA, CFP® | Exit Planning, Sell a Business |
Have a Question? Ask your question below and one of our Advisors will answer. The Discount for Lack of Marketability, or DLOM, is a discount applied to a company’s value when an ownership interest cannot be converted to cash quickly, and free of excessive expenses....
by Holly Magister, CPA, CFP® | Business Valuation, Sell a Business |
Business goodwill is defined as an intangible asset that increases a business’s value above and beyond its current market value. Business goodwill arises when one company is acquired by another at a premium, above market or book value price. Goodwill can be attributed...
by Holly Magister, CPA, CFP® | Sell a Business |
v Have a Question? Add it to the bottom of this post! In any business acquisition, a deal structure must be formed to specify the financial terms, conditions, and process for successfully completing the transaction. The deal structure outlines a set of terms that...
by Holly Magister, CPA, CFP® | Business Valuation, Grow a Business, Sell a Business, Trepopedia |
The term business value is a broad term that refers to any form of business valuation which determines the financial health and potential of a company. While a purchase or selling price is simply an amount that may be asked to be paid for a 100% ownership of a given...
by Holly Magister, CPA, CFP® | Business Valuation, Grow a Business, Trepopedia |
Capitalization Rate, more commonly referred to as Cap Rate, is the rate of return on a real estate investment based on the income the property is expected to generate. In other words, the Capitalization Rate is used to estimate an investor’s likely return on...
by Holly Magister, CPA, CFP® | Grow a Business, Sell a Business, Trepopedia |
EBITDA Valuation is an industry multiple or ratio method that is used commonly to determine the Enterprise Value of a company operating in the lower-middle or middle market. It differs from the method typically used by small businesses (also referred to as Main...
by Holly Magister, CPA, CFP® | Sell a Business, Trepopedia |
Seller’s Discretionary Cash Flow (SDCF), also sometimes referred to as seller’s discretionary income (SDI) or seller’s discretionary earnings (SDE), is a computation often used when valuing a small or medium-sized business. While larger, public companies are often...
by Holly Magister, CPA, CFP® | Sell a Business, Trepopedia |
v Have a Question? Add it to the bottom of this post! Enterprise Value, also sometimes called “EV,” is a measure of a company’s total business value. EV is the theoretical price for a company if it were to be bought, and because EV accounts for a company’s debt and...
by Holly Magister, CPA, CFP® | Grow a Business, Sell a Business, Trepopedia |
The term “dry powder” is financial slang and refers to a company’s or investor’s highly liquid securities which are kept on hand to finance future obligations, purchase assets, or invest in opportunities. Such capital also may be kept on hand to provide emergency...
by Holly Magister, CPA, CFP® | Business Valuation, Sell a Business, Trepopedia |
Middle market or “mid-market” companies or firms are businesses that typically earn between $5 million and $1 billion in yearly revenue. This group of businesses makes up the middle third of the U.S. economy’s revenue and employs 25% of its labor force, with large and...
by Holly Magister, CPA, CFP® | Grow a Business, Sell a Business, Trepopedia |
Non-Solicitation Agreements (NSAs) are made by two parties to protect one party from a potential loss of income or assets. This type of agreement is warranted and often made when one party is about to become aware of certain important relationships the other party...
by Holly Magister, CPA, CFP® | Business Entities, Grow a Business, Sell a Business, Start a Business, Trepopedia |
A buy-sell agreement is a legally-binding agreement between two co-owners that governs any situation in which one co-owner dies, chooses to leave the business, is incapacitated, faces divorce, bankruptcy, retirement, or sells his/her share of the company. The...
by Holly Magister, CPA, CFP® | Business Valuation, Exit Planning, Sell a Business |
As a business owner journeys through entrepreneurship, it’s inevitable for most to seek a quick business valuation on one or more occasions. Such a conversation with a business advisor may be about the need to understand the value of the business for the purpose of...
by Holly Magister, CPA, CFP® | Grow a Business, Sell a Business, Trepopedia |
In business, the term exclusivity refers to a party’s sole rights with regard to a certain business activity. This may include business relationships, pricing, products, or sales. Another application of this term in the business world involves relationships between...
by Holly Magister, CPA, CFP® | Grow a Business, Sell a Business, Trepopedia |
The term ‘rule of thumb’ generally refers to the idea of a principle with a broad application – something that is not intended to be exact or strictly accurate. In the business world, the term ‘rule of thumb’ refers to a guideline that provides simplified advice about...
by Holly Magister, CPA, CFP® | Business Valuation, Grow a Business, Sell a Business, Trepopedia |
Intangible assets are those assets in a business which are not physical in nature. Some examples include: intellectual property, (like patents, trademarks, and copyrights), brand recognition, special knowledge, and business methods. Such non-physical assets add value...
by Holly Magister, CPA, CFP® | Grow a Business, Sell a Business, Trepopedia |
Meaning ‘for the sake of form’, the term pro forma refers to a document that is often provided as a courtesy and satisfies predetermined minimum requirements in an effort to best predict the future outcome of a transaction within a business. One of the most common...
by Holly Magister, CPA, CFP® | Exit Planning, Sell a Business |
The method chosen to transfer ownership of a business for sale is one of the most important factors to consider as a business owner. And the reason for its importance is related to the wide differences in the amount of cash received (net of taxes) by the business owner across the various methods of transfer or sale. An ESOP or Employee Stock Ownership Plan is one method of ownership transfer or sale many business owners consider when they decide it’s time to retire. That said, let’s explore the ESOP as a potential method of transfer or sale from both the business owner’s and employees’ perspectives.
by Holly Magister, CPA, CFP® | Sell a Business |
When a business owner begins to negotiate the sale of his or her business with buyers for the first time, he or she will inevitably face a difference between the buyer’s offer price and the desired selling price. It’s at this point when a lively debate between the parties will occur over the underlying reasons for the business’s asking price being what it is. At this time a seller will be well-served if able to offer justification for an increased business valuation and a higher business selling price.
by Kathleen Kuznicki, Patent Attorney | Grow a Business |
As businesses grow and develop, so do their intellectual property (IP) assets. And if these businesses are engaging in proper IP management, they are filing trademark and patent applications to protect their IP. However, because of the public nature of both trademark and patent prosecutions, one may get an inkling of their competitors’ business plans if they monitor these application filings. Though not a perfect way to predict the exact nature of your competitors’ future offerings, keeping track of IP filings can be a guide to where your competitors are moving.
by Holly Magister, CPA, CFP® | Sell a Business, Trepopedia |
The valuation multiple formulas available to compute the value of a business for sale are numerous and can be confusing to many small business owners. In fact, many professionals can be similarly confused by the various multiple formulas currently in use.
by Paul Cronin | Grow a Business, Sell a Business |
My business partner, the author Jack Beauregard, and I recently had breakfast with Lorraine McGregor from Vancouver, BC Canada. Lorraine is the author of books on Exit Planning and Entrepreneurship, as well as an experienced business consultant. We were all discussing why so many business owners were delaying (the inevitable) transition planning from their businesses.
by Holly Magister, CPA, CFP® | Exit Planning, Grow a Business, Sell a Business |
Business Valuation Experts come in many forms, and for a business owner it can be very difficult understanding the various designations. More importantly, when the business owner is in need of a valuation, understanding exactly what type of expertise is necessary and ultimately who to hire can become a daunting task.
by Greg Younts, CMAI | Sell a Business |
To sell or not to sell, that is the question many business owners ask themselves at least once during their tenure as business owners. Sometimes, the decision to sell is easy if the owner is ready to retire or has decided to pursue a new career or business opportunity. However, in many cases, business owners struggle with this critical decision. Fortunately there are several steps you can take to make an informed and stress-free decision on whether to sell your business now, later, or not at all. In all cases seek the advice of several third party professionals such as a Business Attorney, Certified Public Accountant (CPA), Business Appraiser and/or Broker, and a Financial Advisor as well as consultants in your industry.
by Matt Harnett, CAIA | Sell a Business |
v Have a Question? Add it to the bottom of this post! As a business owner, you have worked long and hard to get your company to a point where it can be sold. You have likely worked long days and endured sleepless nights at some point during your journey. So selling is...
by Sabrina Baker, PHR | Sell a Business |
In a perfect world, when one business buys another, the staff of the purchased company would be able to transition into a role with the buying company. Unfortunately, this isn’t always the case. What’s more, the company being purchased may not know what is...
by Holly Magister, CPA, CFP® | Grow a Business, Sell a Business |
One of the many questions asked by entrepreneurs as they plan for the sale of their business is related to the Adjusted EBITDA definition.
by Paul Cronin | Sell a Business |
When an asset has a grossly inflated price, it is by definition an asset bubble. Does this apply to many small businesses in the US? Probably yes, in my opinion. Most small businesses have a balance sheet listing some assets; therefore they are subject to being part of a bubble.
by Chris George | Business Capital, Grow a Business |
Most individuals who consider themselves entrepreneurs believe they must start their own business to earn the title. However, what some do not realize is that the entrepreneurial spirit can be fulfilled in a variety of ways, not the least of which is purchasing an existing business. The following is a list of advantages for buying a business over starting one from scratch.
by Holly Magister, CPA, CFP® | Exit Planning, Sell a Business |
If a customer’s total revenue for the year represents 8% or more of all revenue for the same year, you have a customer concentration risk.
by Chris George | Sell a Business |
The reasons for selling a business are many and varied; in the end, however, the desired result is the same – money. So how does one go about maximizing profit when selling a business?
by Holly Magister, CPA, CFP® | Grow a Business, Sell a Business, Trepopedia |
If you’ve grown a valuable business, there is no doubt your employees are a big part of your success. You also know that hiring, training, and managing a great team of productive employees is a difficult task. And keeping your best employees is yet another accomplishment! But the painful truth is your competition would be very pleased to hire away your best employees.
by Andrew N. Jones | Sell a Business |
Most entrepreneurs build a business with a view to an eventual profitable exit. Most probably have lifestyle aspirations in mind that imply a certain amount of money to be realized from a sale. Whether they are looking at an exit now – or a decade from now – they need more than the subjective opinion of friends and acquaintances as to how much their business is worth.
by Holly Magister, CPA, CFP® | Business Capital, Sell a Business |
Many business owners are under the wrong impression that their business debt will disappear when their business is sold. In some cases, the debt is absorbed or is assumed by the buyer. But usually this is not the case.
by Holly Magister, CPA, CFP® | Sell a Business |
In many cases, the business owner finds it difficult to know who they should target as a potential buyer for their business. At first glance, any buyer with a checkbook may be attractive. In practice finding the right buyer when selling a business is both an art and a science.
by Matt Harnett, CAIA | Sell a Business |
Management Buyouts, or MBOS, can sometimes have a negative connotation. Maybe that’s because it sounds like the management team is getting “taken out”. On the contrary, it is the exact opposite. A Management Buyout is a fancy acronym for when the current managers buy controlling interest of a company from its owners. That’s a good thing for management!
by Holly Magister, CPA, CFP® | Grow a Business, Sell a Business |
Often, business owners ask me one of those “quick questions” – what can I do to maximize the sale price of my business? The answer? Not as simple as you may think. But there are 4 factors that can increase the value of your sale price.
by Holly Magister, CPA, CFP® | Business Capital, Grow a Business, Sell a Business, Trepopedia |
EBIT is an acronym for Earnings Before Interest and Taxes. This is a term Bankers often use as a measure of a business’s earnings from operations. The EBIT reveals operating profitability without non-recurring or unusual income or expenses.
by Paul Cronin | Sell a Business |
This is a story with an unhappy ending. I heard this story from employees who worked for a company many years ago. I knew the company well and as far as I know, this is the truth.
by Kathleen Kuznicki, Patent Attorney | Grow a Business, Start a Business, Trepopedia |
A copyright protects the particular ways by which people expressed themselves. A copyright gives an owner the exclusive legal right to reproduce, publish, sell, or distribute an original creative work.
by Holly Magister, CPA, CFP® | Business Valuation, Sell a Business |
As I meet with entrepreneurs, I’m often asked the same question: “When is the best time for me to sell my business?” The answer to this question is not the same for every business owner, for many reasons.
by Holly Magister, CPA, CFP® | Business Valuation, Grow a Business, Sell a Business, Trepopedia |
EBITDA is an acronym for Earnings Before Interest Taxes Depreciation and Amortization. EBITDA is often used as a measure of a business’s cash flow. Also it is used frequently in many business valuation formulas, depending on the business’s specific industry.
by Holly Magister, CPA, CFP® | Grow a Business, Sell a Business |
The best solution to a problem lies in uncovering what the root cause of the problem really is. So often, this is the case when an entrepreneur is struggling with profitability in their business. Over the past few posts, we have discussed the concepts of how a minimum order policy and Pareto’s Principle applied to the customer/client base can be very powerful to help an entrepreneur improve the value of their business.
by Kathleen Kuznicki, Patent Attorney | Grow a Business, Sell a Business, Start a Business, Trepopedia |
Proprietary information such as customer lists and recipes are intellectual property. However they are not formally protected in the same way as are trademarks, copyrights or patents. These and other types of confidential information can only be protected if they are treated as trade secrets.
by Andrew N. Jones | Sell a Business |
One of the most crucial, yet subjective, aspects of any business valuation is determining the specific company risk premium of the business being appraised. The specific company risk premium varies with each company and is intended to be an adjustment to reflect a variety of circumstances inherent in the company and its industry.
by Eric C. Pfeil, Attorney | Business Valuation, Sell a Business |
Anyone who owns a family business is intimately familiar with the blood, sweat, and tears associated with building and then keeping the business viable. Nevertheless, it is not unusual for the business entrepreneur to postpone consideration of various issues involved in transferring the business to the next generation, including determining the value of the business.
by The Exit Promise Contributors | Grow a Business, Sell a Business |
Your worst nightmare comes true! You get an email on Friday afternoon from your largest customer indicating that they are changing suppliers for “strategic reasons.” They represent 20% of your sales revenue and 35% of your profits.
by Holly Magister, CPA, CFP® | Sell a Business |
It is a unique pleasure to find two equal partners or shareholders acting in harmony over selling a business. Unfortunately, when I say “unique”, I mean rarely ever. Please understand, it is not as if this never happens. It is just so unusual, that when faced with the situation, I find myself warning both parties before they proceed to sell their business.
by Andrew N. Jones | Sell a Business |
When considering your business valuation and business risks in the hopes of selling that business, there are many factors to consider. One important factor to understand is the application of valuation discounts. The valuation of a controlling interest versus a minority interest within a privately held business can have different values, depending on the circumstance.
by | Grow a Business, Sell a Business |
The various types of valuation reports produced by a business appraiser can be confusing to an entrepreneur, especially when the appraiser belongs to more than one valuation association. Under most appraisal standards, a business appraiser can produce two types of reports: a detailed appraisal report or a calculation report.
by Andrew N. Jones | Business Valuation, Grow a Business, Sell a Business |
At some point in time, every business owner will leave their business (voluntarily or involuntarily). Through proper planning, an owner should expect to achieve their desired goals. Statistics show that the value of an owner’s business accounts for over 90% of their personal wealth. However, more than 75% of all business owners do not have a formal transition plan in place.