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.Read More
BayState Business Brokers Blog
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.Read More
Tags: buy a business
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:
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.
I once was selling a small landscaping business. The business had about $500,000 in revenues and a small amount of equipment. They did landscape maintenance in several high-income suburbs. We had an interested buyer who owned a landscaping business with about $2,000,000 in revenues. Over the course of two months, the potential buyer asked about everything you could about the business he planned to buy. What he didn’t do was present an offer. One day, another buyer, who owned a landscape supply company, and his son, who was experienced and educated in the business, presented an offer, negotiated the details, and signed an agreement to buy the business. They closed on the business sale a few months later.Read More
Tags: buy a business
When you are making an offer on a business, don’t be surprised to find that there are other bidders. In many of our business sales, we are receiving multiple offers. This is a common occurrence in sales of larger businesses by investment bankers and the buyers are familiar with how to handle the situation. Many individual buyers that we deal with are not.
When a person buys a business, they usually recognize that getting trained to run it is important. But, it may not be given the attention and importance that it should. If you are buying a business, here are some things to remember when you are working out the training with the seller.
When I think of a cowboy, I think of a tough individual who doesn’t need anything or anybody to do his job. That may work on the range, but it doesn’t work well when you are buying or selling a business.
Buying a business is different than buying a used car. If you act as though it’s the same thing and treat the owner of the business like a used car salesman, you will suffer. That can result in the owner deciding not to sell to you, giving you a worse deal, or not being as helpful to you as he could be after you do buy the business. Here are some important things to keep in mind when you meet with the owner.