Category Archives:Business Valuation
Orange County Business Broker - What is considered in a Business Valuation?
After contacting a business broker Orange County, the first thing he will recommend is for you to get a business valuation report. A business valuation is crucial when selling or buying a business. It is a report that will help you know how much a business is really worth. The report can also be used to identify the strengths and weaknesses of a business. It is only with a valuation report that you will be able to set a fair selling price. But what is really considered in a business valuation?
Business history
From its humble beginning, your business has come a long way. It has evolved over the years. During a valuation, your business brokers Orange County will want to see how your business has been performing in the last three to five years. This helps determine if the business is failing or thriving. You will need to provide documents of your business’ origins, journey, goals and financial records.
Employee information
It is much harder to sell a business that is dependent on the business owner. Buyers are interested in independent businesses. This is why during a valuation you will need to provide information about your business. Potential buyers will need information on the job descriptions of your employees. The big question that needs to be answered here is this; can the business thrive without the owner? You also need to identify key employees and also provide information on leave entitlements.
Legal and commercial information
A business valuation is not complete without considering commercial contracts, licenses, lease agreements, permits as well as registrations. The legal and commercial information will impact the overall value of your business. It is imperative that you provide proof that your business complies with the relevant health, safety and environmental laws. You also need to disclose your current and pending legal proceedings.
Financial information
Profit margins, asset market value, annual turnovers and assessment of the tangible assets fall under financial information. This is the most important step in a business valuation. Your business broker Orange County will need this information to know about the liabilities that your business has and if it is thriving or not.
Market information and industry conditions
Last but not least, the business broker will have to look at the outside forces. Your business is only as valuable as how much the market is willing to give. This is why timing is everything when selling. For an accurate valuation report, business brokers Orange County must consider the target market and the industry conditions.
A business valuation report is a must have even when you don’t plan on selling your business. It can help identify the strengths and weaknesses of your business. Make sure that you hire the right team for this. You also need to understand the valuation models that your valuation expert will be using.
Business Broker San Diego - Factors that Affect a Business Valuation
Hiring a business broker San Diego is the first thing you need to do when getting ready to sell. The second step is to get a business valuation. The purpose of a business valuation is to help you understand how much your business is worth and to set a fair listing price. In this article, we shall be taking a look at the main factors that affect business valuations.
Business earnings track record
Businesses that generate stable, above industry average earnings are more valuable. This is why your business brokers San Diego will consider your financial records for at least the last five years. The historical trend in your income is what determines if a business is valuable or not. If the gross income has been increasing, it will have a positive impact on valuation. A downward trend, on the other hand, will devalue your business.
Growth prospects
The objective here is to determine how much potential for growth a business has. Focus is on the potential of the business to grow regardless of its industry but based on its unique potential. Your business model will also be considered here. If the model has a high growth potential, the value of your business will be much higher.
Location
Just like with real estate, business is all about location too. The location of your business will have a significant impact on its value. This is because you can have an incredible business model but you are in a location that offers little potential to succeed or grow. As a matter of fact, even if your business is not as successful but is in a prime location, the location will have a significant positive impact on the valuation.
Staff and management
Information on your employees will need to be looked at. If your team is weak, it will devalue your business. The same goes for a weak management team. The fact that the success of a business is dependent on the owner or one employee means it is a high risk business and its value will not be great.
Reputation
Business brokers San Diego recommend some businesses to rebrand before they are listed. This happens when the reputation of a business has been severely tarnished. The goodwill and reputation of your business is very valuable. Overwhelming positive reputation will boost the value of your business.
These are just the main factors that will affect your business valuation. There are many more areas that are considered. Talk to your business broker San Diego to learn more about these and more factors as well as the valuation model that will be ideal for your business.
How to Find the Right Business to Buy
When you want to purchase a business, the first step is obviously to hire a reliable business broker San Diego. A business broker that has sold many businesses in the past will have a sound understanding of the business sale process and also an impressive professional network that will help find the business you want fast and at the right price. Even so, there are some questions you need to answer in order to find that perfect business.
What is your budget?
This is a no brainer. When you contact business brokers San Diego, the first thing they will want to know is how much you want to invest. Even with financing on the table, you need to get prequalified first so as to know how much you can get. Your budget should also include working capital because your business will not be profitable right away.
How much risk do you want to assume?
After reviewing your financials, you will be able to know how much risk you will be able to assume. It is good to consider your personality too. The newer businesses are riskier than the ones with a long track record. The best news, however, is that your business broker will advise you on the risk of each business that you consider.
How involved do you want to be?
This is a very important question you need to ask. Do you want to run the business as a hobby or as a full time job? Do you need the business to be your primary source of income? How much you want to be involved will help the business broker San Diego identify the business that will be perfect for you.
What are you good at?
To find that perfect business, you will have to consider your skills. Your skill sets can help narrow down to the perfect business. Do you love interacting with customers behind a counter of a retail location or just love cold calling? Are you good at managing people? You don’t have to be an expert in the field you want to invest in but you should have interest in it. The lack of interest will only cause you to want to sell as soon as possible.
Choosing the right business to purchase takes time. You have to consider all the available options and match them with your interests. Business brokers San Diego are adept at helping you find the exact business that you need.
Choosing the Right Franchise to Buy
Every business broker Orange County will recommend that you buy a franchise if you have the means. This is because a franchise offers the best security and the highest profit. All in all, this is not a decision you should rush. In this post, we will be looking at the important things you should consider before you purchase a franchise.
What do you want from the franchise?
As soon as you contact business brokers Orange County, this is without any doubt the first question they will ask. Your answer is what enables the business broker to identify the franchise that is right for you. Needless to say, people buy businesses for all manner of reasons. You might want to run a franchise as a hobby or work full time. Will the franchise be the primary source of income? Do you want to build equity? These are all questions you will have to answer. Be honest as your answers are what will help the business broker find the right business.
How much money do you want to invest?
This is another question you will have to answer before the search for a business for sale starts. Unlike small businesses, you will have to be prepared to spend quite a lot of money when buying a franchise. You also need to account for the fact that your new business will not be profitable right away. In addition to considering the purchase cost, you need to account for other expenses you will have to incur. You need to set money for equipment, inventory, working capital, franchise fee and other expenses. With your budget in hand, your business broker in Orange County will be able to narrow down to the businesses that you can afford to buy and operate.
What is your exit strategy?
You don’t plan on running the new business forever, are you? How long do you want to run the business? Your plan can be to run the business for five years or it might even be something you plan on passing down to your heirs. Answering this question is very important when purchasing a business.
These questions will help find the right franchise to invest in. The rule of thumb is never to rush into the purchase. Take the time to evaluate the pros and cons of the decision and be certain that you can comfortably run the business. Don’t forget to consider the risk that you are willing to assume.
When is the Right Time to Sell a Business?
Prior to contacting a business broker Orange County, a lot of questions go through the mind of a business owner. Most of these questions are on whether it is the best time to sell. For some business owners, selling was not the initial plan. Some wanted to run their business and pass it down to their children. However, due to challenges, selling may seem like the best way forward. If you plan on selling, you must make sure that you are selling for the right reasons and not making an impulse decision. Here are some good reasons why business owners sell.
It was always the plan
With some entrepreneurs, selling their company was always the plan. In this case, their exit strategy will include selling. If this is the reason for selling, you need to sell when your business is at its best. This is the time when business brokers Orange County will be able to help you get the best deal.
Declining performance and profits
As aforementioned, it is always good to sell when your business is doing well. This is why for some people; they consider selling when the performance and profits of their business start to plummet. In this case, the longer you wait to sell the less money you will make in the sale. If there is no way of turning things around, you can simply sell. This is a decision made when the new competitive threats proves it is unlikely for the business to recover.
No longer enjoy running the business
When starting up, it can be fun to run a business. This is mostly because you have control over everything. However, as the business grows, you tend to lose the control. You have to hire teams to help with business management. This may cause you to be detached and no longer enjoy running the business. If you no longer have the motivation, selling the business could be a great idea. You just need to contact a business broker Orange County to help prepare for your exit.
It has outgrown your skills
This is a tough thing to face. When you can no longer run the business because you lack the skills, selling could be a viable option. That is more so if you no longer enjoy running the business.
Threats on in the future
Threats on the horizon can also cause you to sell. If you predict that the new regulations or changes in your industry will drown your business, selling now can help avoid huge losses.
Lucrative opportunity
Last but not least, you can sell your business because you have other lucrative opportunities to pursue. You can then use the money from the sale to finance your new venture.
What are the Ingredients of a Great Business Broker?
Hiring a business broker San Diego requires a great deal of research. You cannot just hire the first person that gets in your way. You need to dig deeper into the expertise of the broker before you bring him or her onboard. It is also good to match the broker to the type of sale that you are considering. In this post, we shall be taking a look at the key ingredients that distinguish a reliable business broker.
Integrity
One thing you need to note about good business brokers San Diego is that they have to earn your trust. The success of a broker thrives on his reputation. This is why everything the broker does has to make you build confidence in him. The last thing you want to do is to work with a broker who will leak your secrets or even be working with the other party.
Experience
Having a license and the professional training is not enough. A good business broker should have considerable experience selling businesses that are similar to yours. This is because it takes a lot of time to learn the ins and outs of selling a business. The transaction can be lengthy and involves a lot of negotiations, business nous and accountancy. Hire someone with at least three years of experience.
Good communication
How well you communicate with your business broker matters a lot. You don’t want to sign a contract with a broker that is never available to answer your questions. You need someone with great communication skills. The broker should be available when you need him and keep you up-to-date on the progress of the sale. You can gauge the communication skills of a business broker by taking note of how he responds to you in the initial appointments. Is he always ready to talk to you or does he keeps on postponing?
Negotiation expertise
A lot of work goes into negotiations. This is why you need a business broker San Diego who is a great negotiator. They should be able to structure a sale perfectly and help with all the required negotiations. Good negotiation skills only come with experience.
Exposure
Last but not least, the right business brokers San Diego will have significant exposure. They will have the professional networks that you need to sell fast and profitably.
Hiring a business broker takes time. Never rush the process. You should only hire someone not because you love how he looks but because he has the expertise and you feel comfortable working with him.
What the Purchase Offer Should Include when Buying or Selling a Business
A good business broker San Diego will help you find the right buyers. It is the duty of a business broker not just to find a person interested in buying your business but also to do a background check to ensure the potential buyer has the means and interest to buy your business. Once you are satisfied with the initial checks and the initial offer, the next step is the firm purchase offer. This is referred to as the Heads of Agreement or Heads of Terms Agreement. This is the document that will set out the main points of the business sale. It is good to note that this document is not legally binding apart for the confidentiality and exclusivity issues.
What is included in the purchase offer?
Experienced business brokers San Diego will be able to help with the Heads of Agreement. To be on the safe side, you need to understand the details that the document should cover. They include the following:
- What the sale includes
- Price and the payment structure
- Terms of the period of exclusivity to complete the sale. This also includes the period’s termination.
- Preconditions for the business sale.
As aforementioned, parts of the Heads of Agreements are legally binding. The legally binding parts are set in separate documents. These parts include:
- Confidentiality
- Exclusivity
- Indemnities
- Warranties
The Seller’s disclosure letter is another common legally binding agreement. This letter limits the liabilities under the warranties. The letter may also state that the buyer and seller will pay each other’s costs in the event of the sale falling through. An experienced business broker can help get the best terms here.
The above documents must be prepared and checked carefully. The reason for this is because if the seller fails to meet the set conditions, the sale will be terminated. If the warranties are breached, the seller can sue the buyer for damages. It is also considered to be a criminal offence for sellers to provide misleading or false information about their shares.
Due diligence
After the signing of the Heads of Agreement, the buyer’s business broker San Diego will go ahead with the searches into the business records. This is known as due diligence. There are basically three types of due diligence:
- Legal
- Financial
- Commercial
Throughout the due diligence stage, negotiations will still continue with the seller on how to draft the final sale agreement or the sale purchase contract. Whether you are buying or selling a business, finding the most qualified business brokers San Diego is the most important thing to do.
Contracts You Have to Sign When Buying or Selling a Business
One of the duties of a business broker Orange County is to help you with the paperwork. In the sale or purchase of a business, you will come across several contracts. Making sure you understand each of these contracts is the key to avoiding trouble down the road. In this article we shall be taking a quick look at the main contracts you need to be familiar with as a business buyer or seller.
Contracts with advisers
There are several contracts you will need to sign. The first will be a contract with the financial adviser for the tax and finance advice. You will also need to sign a contract with a solicitor for legal advice. Another contract you will not be able to avoid is that with the business brokers Orange County. Prior to signing any of these contracts, it is imperative that you read and understand every term and condition. Don’t be afraid to negotiate the terms in the contract. Needless to say, you should only sign a contract with a professional that you have confidence in.
Confidentiality agreement
The purpose of this contract is to ensure that business secrets don’t get in the wrong hands. This contract is mostly drawn up by a business broker and has to be signed by a potential buyer before being shown the sales memorandum. The contract is also referred to as the non-disclosure agreement.
Sales memorandum
This is the document that introduces a buyer to the business he is interested in buying. This document includes vital information about the business. The important details you will find include the following:
- Business sector
- Duration the business has been trading
- Main financial details such as profit, total debt, cash flow and asset value
- Structure of the sale. Are you selling the whole business or part of it?
- Number, age, job description, length of service and salaries of the staff
- Location of the business premises, leasehold, rent and rates
Purchase offers
The purchase orders have to be made in writing. After giving an initial verbal offer, a buyer must then provide a letter that sets out the main details. The offer given should be subject to contract. A good offer will include the following:
- What the buyer is offering to buy
- Offer price and the payment terms
- Information required by the buyer prior to making the offer.
The four are the main contracts you will have to sign when selling or buying a business. The best news is that business brokers Orange County will help with all the paperwork. You also need to involve your lawyer in order to confirm if the contracts are legally binding.
San Diego Business Broker - Why is it a Great Idea to Work with a Business Broker?
As you may already know, the full time job of a business broker San Diego is to sell businesses. This means he has a lot of experience and connections needed to help smooth the process. Even so, some people choose to sell on their own. In this article, we will be discussing the top reasons why it is a great idea to work with a business broker.
Solid advice
To start with, working with business brokers San Diego guarantees that you get in-depth insights on marketing, valuation, negotiations, prospecting and all other fundamental elements that pertain to the sale. Most business brokers also have extensive prior business experience which enables them to understand the operational, financial and legal issues of your company. Simply put, working with a business broker will get the guesswork out of the way. A business broker will serve as a facilitator who will streamline the process while allowing you to focus on the core operations of your business.
Art of marketing
An experienced business broker will help you get multiple qualified buyers to the table. Needless to say, when there are several parties interested in your business, two crucial things will happen. First, the seller will have a better chance of getting a fair market value for his company and get great sale terms. Second, the risk of a sale not being consummated will be reduced.
Professional negotiations
One of the main reasons why you should hire a business broker San Diego is so as to leverage on professional negotiations. Business brokers are professional negotiators that know how to overcome obstacles that prevent business sales from closing. Your broker will not fall prey to emotions and will be able to leverage on years of experience to help get the best terms and price for your business. Your broker will further keep the deal on the right track and manage the seller’s expectations.
Preserve confidentiality
The fewer the number of people learn that you are selling your company the better. Business brokers San Diego know how to preserve confidentiality throughout the marketing and sale process. This is important because it helps you as a seller to control timing and also prevent suppliers, employees, customers and competitors from leaving.
All things considered, a business broker is basically a ‘quarterback’. They are experienced sales professionals that thoroughly assess a business and tap into their resources and professional networks to help achieve your goals. You just need to make sure that you hire the most reliable business broker in the business.
Orange County Business Broker - Best Tips for Working with a Business Broker
Finding a business broker Orange County is quite easy. With a simple Internet search, you will find the contacts of dozens of promising firms in your area. The problem, however, is that not every business broker you contact will have your best interest at heart. Some are out to make money at your expense. Additionally, how well you relate with the business broker will determine the level of success you achieve. It is for this reason that we have covered crucial tips you need to use to find the best firm and get the best services from a broker.
Find someone that has your best interests at heart
The first thing you need to do when hiring business brokers Orange County is to ensure that they are serving your interests and not those of buyers. A broker that is serving your interests will do everything within his power to facilitate the deal and to help you achieve the highest possible sales price. He should also be able to build your confidence on the first meeting.
While meeting with a business broker, you should be wary of brokers that require you to give them money up-front for any service including business valuation. If money is required, know why they need the money. How will they be using that money? Most firms that ask for money upfront for business valuation tend to be focused on selling their valuation service and not helping you sell your business.
Create a healthy relationship with the broker
As aforementioned, the type of relationship you have with a business broker will affect the success of the sale. You want someone you can trust. If you are not comfortable giving vital information about your business to the broker, chances are the broker will not have everything he needs to sell your business the right way. Only hire someone you feel comfortable to speak honestly with and someone that will speak openly and honestly with you. One way of building trust in a business broker is looking at his track record and professional credentials. IBBA membership, CBI attainment and designation awarded by the IBBA will help you learn more about the broker. Hire a business broker Orange County that has met professional standards.
Ensure the broker is interested in learning about your business
When you contact a business broker, the last thing you want is for him to give you an offer without even taking a look at your business. Learning more about your business is the foundation for developing a proper marketing strategy. A prospective broker must show interest in learning about the mechanics of your business before developing a marketing strategy.
Ensure they have a good relationship with other professionals
Last but not least, you need to make sure the business brokers Orange County that you are considering have a good relationship with accountants, law firms, bankers and other relevant professionals. This shows they have the connections you need to sell fast.