Posted on Thu, May 27, 2010
This excellent article appeared recently on the INC Magazine blog at http://www.inc.com/articles/2001/10/23561.html#comment-51927727
When selecting a broker to sell your business, be suspicious if:
The broker wants a significant or total fee paid upfront.
Many brokers have begun taking upfront fees, but generally the total fee is a combination of an upfront fee and commission paid upon sale of the business. But in what Glen Cooper, president of Maine Business Broker's Network in Portland, Maine, calls a "take away" sale, an unreliable broker meets with you, runs some quick numbers, tells you that you can get your price or even more for your business, and then asks for a check to get started. In many cases, business owners are so relieved that they've found a broker and elated that they'll write a check on the spot, without checking any references. "They get to 'take away' your check when they leave," says Cooper. "You'll never see them again, if they can help it."
During your first meeting , the broker says he or she can get your asking price or higher. Be wary of too much optimism. "The key to selling is that the price be reasonable," says Jeff Jones, chairman of the board of Certified Business Brokers LC in Houston and president of Certified Appraisers, Inc., the firm's appraisal practice. And according to Tom West of Business Brokerage Press in Concord, Mass., most owners overvalue their businesses. An unreliable broker might suggest after a brief meeting with you that he or she can get you your asking price or higher for your business.
The broker doesn't have a Web site. Most likely, if the broker doesn't have a site, he or she is behind the times. The Internet is a powerful marketing tool for business brokers, according to Cooper. Is the site well-written? That's another way to gauge a broker's competence, he adds.
The broker can't or won't show you printed marketing materials. "Today, all brokers prepare some kind of offering summary for each business they represent," says Cooper. He or she should be willing to share materials prepared for past clients to show you how they might handle your business.
The broker doesn't seem well grounded in business valuation.
"Your broker should be able to explain business valuation to you clearly," Cooper says. If he or she can't, then how can he or she explain to a buyer what your business is worth? Make sure your broker is confident in this area.
The broker is not licensed to sell or lease real estate in your state. Ninety-two percent of business brokers have a real estate license, according to an annual survey of business brokers West conducted. Even if your business doesn't include real estate, make sure your broker carries the license. "Unlicensed brokers are usually new to the business or out-of-state con artists," warns Cooper. And just because the broker holds a real estate license doesn't mean he or she should be selling commercial or residential real estate too. A good broker will hold the licenses but be focused on selling businesses.
This excellent article appeared recently on the INC Magazine blog at http://www.inc.com/articles/2001/10/23561.html#comment-51927727
Copyright © 2001 Inc.com LLC
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com
Posted on Thu, Apr 29, 2010
Many business owners thinking about selling their business have probably thought to themselves that these difficult economic times are not the right time to sell.
However, according to Marshall Vest of the University of Arizona Economic and Business Research Center in a report issued on March 1, 2010, the recession has been over for more than 6 months.
Here are some of the highlights of Vest's study that affect businesses for sale in Tucson:
- Employment is no longer falling
- Retail sales are increasing
- Personal income has stabilized
- Housing markets are in the early stages of recovery
- News releases of firms hiring workers have improved significantly in recent months.
- Residential building permits, an important leading indicator, bottomed in March 2009 and have increased by more than 70% statewide through December.
- Existing home sales as recorded by realtor data have rebounded sharply.
- Housing prices are no longer falling, according to industry measures.
In spite of these many positive leading indicators, Vest cautions that the recovery will come slowly over the next 3 years or so. But he goes on to conclude that "Arizona will accelerate again and is expected to move back into the top tier of fastest-growing states in a couple of years." Now that's some good news.
For business buyers, the timing of buying a business in Arizona looks advantageous with things just turning the corner and about to rebound. For every buyer, there needs to be a seller.
Click to read the entire report:
http://azeconomy.eller.arizona.edu/AZE10Q1/Recession_Is_Over.aspx
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com
Posted on Sat, Oct 10, 2009
Manage the Income Statement
As a small business owner, when you hear “manage the income statement” your thoughts most likely jump immediately to thinking about strategies to minimize tax impact.
However if you are considering selling a business in Tucson or Southern Arizona, tax deferral is no longer your objective. It is time now to shift gears and begin to examine the income statement from the perspective of someone who may be preparing to buy a business in Tucson or Southern Arizona.
Buyers like to see consistent revenue growth and consistent operational expenses. Revenues, or expense categories, that visibly fluctuate up and down on your income statement from year to year will immediately invite questions. When the option exists, these fluctuations on the income statement may be balanced out by increasing or decreasing revenues, giving or postponing bonuses or capitalizing or expensing certain. Just remember that any such changes made to smooth out the income statement still need to be according to Generally Accepted Accounting Principals.
Taking personal discretionary expenses results in a lower net profit and less taxes. But just remember that for every $1.00 spent, the sales price may be reduced from $3 to $5 or more. Keep receipts for all discretionary expenses in separate folders so that you have proof of these expenses to show to a buyer.
A business broker can explain the process of “recasting” your Income Statement to better determine the profitability of your business and thus the likely pricing range it will fall into in the market. How you have managed your income statement will have an impact on what a buyer is willing to pay for your business.
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com
Posted on Sat, Oct 10, 2009
If you want to sell a business in Tucson or Southern Arizona, or make a Tucson business investment, choose your business broker carefully.
Most business owners seeking to sell their business in Tucson or Southern Arizona have a pretty good idea of what they would like to get for their business. And there are many business brokers who will simply ask them what price they want for their business, and then tell them what they want to hear. “Sure, I can sell a business in Tucson like yours for that price,” they’ll say. They will tell a business owner that they can get whatever he or she wants for the business in order to get the listing. They base this decision not on any analysis of comparable businesses for sale in Tucson or Southern Arizona in the past or present, nor based on the soundness of the business’ financials, rather on their desire to get the listing. Such brokers are in the “listing business”, and are not being 100% honest with business owners seeking to sell their business in Tucson or Southern Arizona during this process.
When you sell a business in Tucson or Southern Arizona, what you end up getting for your business is not what you want for it, but what a buyer, someone wanting to buy a business in Tucson or make a Tucson business investment, will be willing to pay for it. Any rational buyer (and nearly all buyers of small businesses are highly rational about how to invest their hard won dollars) will perform due diligence on your business and determine what they are willing to pay for it based on the reality of its historical financial performance and a realistic assessment of future cash flows. The fact is that this has very little to do with what you may want for your business, or think it is worth. If you are trying to sell a business in Tucson or Southern Arizona, keep in mind that the asking price is what a seller wants, and the sales prices is what a seller gets based on market realities.
If you work with a business broker who is in the “listings” business, and who goes along with listing the business at the price you might want, but a price that is not supported by the financial performance of the business and prevailing market realities, you will get a wake up call not long after the business has been listed. Your broker will tell you, usually within 30-60 days, that your business hasn’t received many inquiries from investors seeking to buy a business in Tucson or Southern Arizona, and that they would like to lower the asking price. They will lower the price repeatedly over time until it reaches the range of its realistic market value. In other words, the price it should have been listed at to begin with. At this point, buyer inquiries are more likely to occur and to be serious.
If this sounds to you exactly like what happens when you are selling a house, you’re right, because it is. Most business brokers operate their businesses based on the real estate model, and have no further training or certification to enable them to properly understand the differences between valuing and selling a business and a home. But the two could not be more different.
If you want or need to sell your business, wouldn’t you rather work with a broker who counsels you to set a realistic market price based on fact-based analysis, and who will sell your business as soon as possible because it is priced right?
Allen & Young’s brokers have achieved many additional accreditations and specializations within the field of business brokerage, and we do not run our business based on the real estate model. Our customers are only satisfied when we put money in their pockets, as soon as possible. We will not list a business at all unless the seller agrees to set a realistic asking price.
If you are serious about selling your business, and want to deal in a straightforward process based on experience, integrity, facts and analysis, please contact us.
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com