BayState Business Brokers Blog

3 Big Reasons to Buy the Assets, not the Corporation, When you Buy a Business

Posted by Marc Gudema on Tue, Dec 04, 2018 @ 02:10 PM

When you buy a business, you have a choice, should you buy the assets of the business or buy the legal entity, typically a corporation?  In most sales, it is better for the buyer to buy the assets.  Here are the reasons why.

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Tags: buy a business, asset allocation, asset sale

When is the best time to sell your business?  The best time may be sooner than you think.

Posted by Marc Gudema on Mon, Nov 19, 2018 @ 11:50 AM

Most of our sales are for business owners who are selling for lifestyle, not financial, reasons.  Common lifestyle reasons are retirement, becoming tired of the business, health, or the need to move elsewhere.  The reason we say that these are lifestyle reasons rather than financial is that the motivation is based on lifestyle considerations, rather than financial.  In most business sales of a successful business, the return on the sale proceeds, after taxes on the sale price, will be less than the owner was earning out of the business.

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Tags: how to sell a business for the best price, how long does it take to sell a business

Should you rent out your business rather than sell it?

Posted by Marc Gudema on Wed, Aug 22, 2018 @ 11:04 AM

Every so often a business owner will ask me whether they should rent the business to a potential buyer rather than sell the business to them.  These business owners also own the real estate so it makes sense to them to get rent for a long time rather than sell the business for a one-time payment.  Renting a business to a potential buyer is not the same as renting real estate, and not a good idea.

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Tags: sell a business

Buying a Business?  Don’t Put the Cart in Front of the Horse.

Posted by Marc Gudema on Thu, Aug 02, 2018 @ 02:55 PM

When you buy a business, there are usually two agreements that are signed.  The initial agreement has the important terms of the deal – such as price, terms, training, what assets are included, and contingencies.  The usual contingencies are for due diligence, financing, obtaining a lease if the location is important, and agreeing on the final purchase and sale agreement.  Some buyers make the mistake of wanting to deal with the contingencies(the cart) before an agreement is signed(the horse).  This is a mistake.

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Tags: buy a business

Get the Best Price for your Business by Selling the Business Without a Price

Posted by Marc Gudema on Thu, Jun 07, 2018 @ 02:58 PM

We are all familiar with the typical process to make a large item purchase.  Someone puts a price on it and we make an offer lower than the asking price.  Then, we negotiate to reach a deal, typically in the middle somewhere.  This is not the way the sale of large businesses is done if a merger and acquisition advisor is handling the sale.  They are usually marketed without a price.  Here’s why, how this sale is done, and if selling your business without an asking price is best.

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Tags: selling a business to an industry buyer, how to sell a business for the best price, strategic value,

An Industry Veteran May Not Be the Best Business Broker

Posted by Marc Gudema on Tue, May 15, 2018 @ 01:04 PM

It’s not unusual for someone to become a business broker after selling their business.  Business owners who want to sell their business are attracted to them.  They know the industry and the business owner may know, and trust, them.  Those are good attributes; but they are not enough to make someone the best choice to sell a business.  Here are some other questions you should ask.

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7 Rules When Selling a Business to an Industry Buyer

Posted by Marc Gudema on Wed, Mar 14, 2018 @ 02:00 PM

For many business owners, selling the business on their own to an industry buyer is attractive  -- particularly when they've been approached by an industry buyer.  They may avoid some of the work involved in preparing to put the business on the market.  They may maintain the confidentiality of the sale by dealing with only one buyer.  They save on the broker’s commission.  But, as with most things in life, there is a cost  -- usually a lower selling price and other terms of the deal.  In many of the sales I've done to industry buyers, many of the industry buyers who didn't buy the business made very low offers.  Here are some rules to remember when dealing with an industry buyer on your own.

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Tags: selling your business, selling a business to an industry buyer

Buying a business? What a business broker would like to tell you.

Posted by Marc Gudema on Mon, Feb 12, 2018 @ 10:30 AM

Buying a business is different from buying anything else. Understanding how business brokers think and operate can help you to be a better buyer. Here are some truths that we operate from:

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Tags: buy a business, how to buy a business, business broker, business brokers

How Long Does it Take to Sell a Business?

Posted by Marc Gudema on Thu, Feb 01, 2018 @ 08:31 PM

One of the questions we frequently get from business owners is “How will it take to sell my business?”  This is the time from when a business owner signs our listing agreement to the closing on the sale of the business.  The quick answer is that it usually takes about 6 to 9 months to sell a business.  This can vary; this blog is about what the steps are that take time and how long they take.  I’ll go through them, chronologically.

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Tags: how long does it take to sell a business, how to sell a business, sell a business

Owners Cash Flow - What it is and why it is the most important number if you are buying or selling a business.

Posted by Marc Gudema on Wed, Jan 24, 2018 @ 02:33 PM

If you are going to sell a business or buy a business, it is important to understand Owners Cash Flow and how it is used to value a business.  In most small business sales, the seller is operating the business and the buyer plans to do likewise. Because of this, the best measure of the earning power of the business is the total income and benefits available to the owner, not the reported net profit of the business. In many small businesses, the owner is not trying to maximize net profit. The owner is trying to take out as much as possible in tax deductible salary and benefits. When buying or selling an owner-operated business, it is important to understand, and know, the Owners Cash Flow of the business. This is the best measure of the earning power of a small business.

Owners Cash Flow Defined
Owners Cash Flow is defined as the income before deducting the primary owner's compensation and benefits, other discretionary, non-operating, or non-recurring income or expense, depreciation, interest, and taxes. This is also referred to as Sellers Discretionary Earnings. This is the amount of money available to pay the buyer an income, pay off debt, and provide for capital to operate the business. In order to accurately calculate Owners Cash Flow, we use tax returns, income statements, and other financial records.

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Tags: owners cash flow, buy a business, sell a business

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