In many cases, the buyer and seller reach a tentative agreement on the sale of the business, only to have it fall apart. There are reasons this happens, and, once understood, many of the worst deal-smashers can be avoided.
If you are considering entering the world of franchising, an important consideration is assessing the value of the business. All of the following factors either affect or help determine valuations of typical franchise operations.
Before answering the question, it makes sense to first ask why people want to be in business for themselves. What are their motives? There have been many surveys addressing this question. The words may be different, but the idea behind them and the order in which they are listed are almost always the same.
41% joined the family business;36% wanted more control over their future...
For a business to sell, there has to be a seller - and a buyer. The buyer of today is a bit different than the one of yesterday. Today's buyer is not a risk-taker, is concerned about the financials, and seems to be overly concerned about price. Unfortunately, buyers have to understand that they cannot buy someone else's financial statements.
Most prospective business buyers really don't know from the outset the exact type of business they want to buy. Experienced business brokers and intermediaries know that many business buyers end up with what is sometimes a far cry from what first captured their imagination.
This question can only be answered by addressing other related questions, specifically: Who’s asking and for what purpose?
Why does it take so long to sell a business? Price and terms are the biggest reasons.
The following is some basic information for anyone considering purchasing a business. Is may also be of interest to anyone thinking of selling their business. The more information and knowledge both sides have about buying and selling a business, the easier the process will become.
Selling one's business can be a traumatic and emotional event. In fact, "seller's remorse" is one of the major reasons that deals don't close.
1.Sellers should find out the loan value of the fixtures, equipment and machinery prior to a sale. Many buyers will count on using it for loan or collateral purposes. No one wants to find out at the last minute that the value of the machinery won't support the debt needed to put the deal together.
2.Sellers should resolve all litigation and environmental issues before putting the company on the market.
3.Sellers should be flexible about any real estate involved. Most buyers want to invest in the business, and real estate usually doesn't make money for an operating company.
4.Sellers should be prepared to accept lower valuation multiples for lack of management depth, regional versus national distribution, and a reliance on just a few large customers.
5.If a buyer indicates that he or she will be submitting a Letter of Intent, or even a Term Sheet, the seller should inform them up-front what is to be included:
6.Non-negotiable items should be pointed out early in the negotiations.
7.The sale of a company usually involves three inconsistent objectives: speed, confidentiality and value. Sellers should pick the two that are most important to them.
8.A PricewaterhouseCoopers survey of more than 300 privately held U.S. companies that were sold or transferred pointed out the most common things a company can do to improve the prospects of selling:
9.Sellers should determine up-front who has the legal authority to sell the business. This decision may lie with the board of directors, a majority stockholder, and a bank with a lien on the business, etc.
10.Partner with professionals. A professional intermediary can be worth his or her weight in gold.