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Frequently Asked Questions

Select one of the frequently asked questions below to learn more about buying, selling businesses.

Question about selling

In our experience, nearly all businesses are saleable if they are priced correctly and are presented to enough people in the right sectors. Even if the business makes a loss.

It is highly recommended that you have a thorough market appraisal and valuation prior to attempting to put a business on the market. It can help highlight areas which, if left unchecked, could cost you thousands of pounds, cause unnecessary delays or even stall a sale.

A well known rule of thumb is ‘as much as a willing buyer is prepared to pay for, and a willing seller is prepared to sell for‘. In reality, it is worth what anyone will pay following a sustained and inclusive marketing campaign having created a competitive selling environment. That said, many factors can determined business value. These include cash flow, sustainable profit, asset value, financial history, location, competition, customer base, industry standards, ongoing management and the economy.

Please see our valuation page for more information.

Valuing a private business is not an exact science. To do it accurately and consistently requires experience, industry knowledge and the ability to analyse and closely examine all the factors involved.

Value can be determined by many factors including growth potential, cash flow, potential economies of scale, sector trends and activity, sustainable profit, asset value, financial history, location, competition, customer base, ongoing management, desirability and the economy.

  • Multiple of earnings – mainly used for businesses with a record of sustainable profits
  • Discounted cashflow – mainly used for large cash-producing businesses.
  • Asset value – used for businesses with a large tangible asset base such as property or plant.
  • Entry cost method – comparing the entry cost alongside the value of the business.
  • Industry precedent – some industries have their own unique valuation methods based on sector criteria.

It depends on the market conditions and what is for sale. Our typical business sale takes between five to eight months from start to finish. You should allow a full year. In most cases, we are talking to the eventual purchaser within the first six to eight weeks.

Question about buying

This varies with each seller.  Some are willing to finance a portion but most sellers are reluctant to finance much of the sale price.  The terms or length of the financing period also vary.

This said, most transactions below $5.0mm will generally apply for an SBA-backed loan to assist in the purchase of a business.  This is a loan that is government backed and offered at competitive rates.  Think of it like a mortgage when buying a house – most people make a down payment and then mortgage the majority of the total cost.

Many small businesses fail within the first year or two after starting up. By purchasing a business that is already up and running, you are eliminating many of the risks associated with a failing business.  An established business has a proven track record, a proven/vetted business model, a customer base, trained and experienced employees, and most importantly, positive cash flow for the new owner. The risk is lower, and often times the growth is accelerated with these fundamentals already in place and with a new owner coming in with fresh ideas and new energy.  Plus you’ll start off in month 1 with a positive cash flow and able to draw an income, whereas most new businesses take a while to build up enough business to generate a substantial income for the owner.

This can be tricky because we’ve learned over the years that everyone’s definition of each of these terms can vary just a bit. Generally speaking, the profit of a business is the amount of money that is left over after all expenses are accounted for. The Cash Flow is the total amount of money being transferred into and out of a business. Cash flow considers not just a businesses profit, but also typically factors in other owners benefits, interest payments or interest received, depreciation, amortization, etc. It shows how much cash the business is producing which could be different than it’s profit from normal operations. Discretionary Earnings are owner benefits, EBITDA and all expenses that are not applicable to the new owner. For instance, the owner may currently have a more expensive office than you plan to have, or may be leasing a vehicle that you do not plan to use, or other expenses that are not applicable to you should you buy the business. Again, this definition can vary from one person to another.

There have been many surveys taken in an attempt to answer this question. Most surveys reveal the same responses, in almost the same identical order of priority. Here are the results of a typical survey, listed in order of importance:

1. To do my own thing, control my own destiny.
2. Don’t want to work for someone else.
3. To better utilize my skills and abilities.
4. To make money.

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