Buying a Business -What is a good Deal?
Buying a Business -What is a good Deal?
Buying a Business is not an easy process. Selling a business is not an easy process. Knowing what is a good deal for a business buyer and what is a good deal for the seller greatly assist in achieving the goals of a business buyer or business seller. Understanding what may be the components of a “Good Deal” as a business buyer or a business seller is both important and necessary. I am a business broker and have been involved with business acquisition and sales for over 25 years as broker representing business buyers and business sellers and as a business buyer and business seller of multiples businesses for my own personal gain.
I work with Business Sellers in South Carolina and Florida. I also work with prospective business buyers in Florida, the Upstate, South Carolina, USA and internationally.
There are many components to a successful business purchase and or business sale.
A discussion I always have when working with a prospective business buyer or one looking to sell a business is to make and keep the “Totality of the Deal” a top priority. There are many aspects of a business sale that make up the totality of the deal. It’s easy to just look at Price and go into the process thinking Price is the goal/target of a successful business sale or successful business acquisition. A business sale involves Price, timing, conditions, terms including non-compete, transition, seller post sale involvement, financing, handling accounts receivables, handling payable if applicable, and the list can go on. I define the totality of the deal as how all the components of a business sale meet the goals of a business buyer or business seller. Consider the following scenario –
A business seller may want to sell his/her business for $1M. As a business broker I engage with 2 prospective business Buyers: In this scenario both buyers are willing to make an offer on this $1M Business for sale. Prospective Business Buyer A offers $1M but requires Seller to stay on for 2 years and wants to pay 60% Down and pay balance over 5 years and wants to keep all Accounts Receivables that are on books at time of closing. Also Buyer A demands to know and meet with top 5 major customers before consummating sale. Prospective business Buyer B offers $900k, willing to have Seller stay on as long as Seller wants, has financing setup so Seller gets entire amount at closing, and Seller keeps all Accounts Receivables.
SO what deal is better for the seller? What Buyer believes their offer is most likely to get accepted by the Seller? While a lot of business acquisitions share commonality every business sale is different. What is important to one business buyer may not be important to another business buyer. What is important to a Business seller is ultimately best determined by that business seller. A business selling for $300k may be considered overvalued by some and a business selling for $5M may be considered “cheap” or a good value by others. But setting the goal of trying to achieve a deal that carefully weighs the entire totality of the deal greatly increases the odds of reaching what may be a good deal for you as a business buyer or a business seller.
Scott Messinger is a Professional Business Broker working with business owners looking to sell their South Carolina Business or Florida Business. Also working with business buyers throughout the South east USA, throughout the nation, and international business buyers as well.
Currently represent businesses for sale in Anderson South Carolina, Greenville South Carolina, Pendleton South Carolina, Pickens County, Jacksonville Florida as well as other areas of South Carolina and Florida.
For More information or to discuss how to sell your business for more, email Scott@GatewayBusinessAdvisors.com or call (864) 210-8226
Thinking about Selling a Business Or Buying a Business? September 2017 Market Information
As a Business Broker Professional, I participate in Quarterly National Surveys along with over 300 other Business Broker professionals. The below are highlights of the most recent results and represents 293 Business Brokers and Advisors in 38 states and over 250 businesses sold in last 3 months. I focus working with Business Sellers in South Carolina and Florida, and work with buyer prospects througout the USA and international. Below are some highlights of these survey results.
What did these 250 + business sell for from April-June 2017?
Businesses sell for a “Multiple” of SDE (Seller Discretionary Earnings)- which is similar to Adjusted Cash Flow- essentially what does the business make for an owner and what could it make for a new owner.
Again, the Multiple Paid for a Business is dependent on size (with some variation- some industries do get paid a higher multiple than other industries). The Multiples paid for businesses sold over the last several years have been somewhat consistent with the average multiple paid for a business that is valued under $1M is approximately 2 X SDE.
How Much Cash at Closing? –
Some Seller financing is typical in business sales of all sizes.Furthermore business buyer rarely walk in with 100% of the Funds needed out of their own pocket. Very often for a business buyer to come up with the 75-86% cash at closing, financing from a bank (often SBA financing) or other financing is secured by buyer to complete the acquisition. For smaller businesses having the business meet the qualifications for an SBA loan can be a challenge and can make a sale difficult or worse.
Where Do Business Buyers Come From?
As you can see above, the smaller businesses may find a buyer “down the street”. But the search for a buyer almost ALWAYS requires a search and marketing that includes local, regional, statewide, nationally and often international.
Who Are the Business Buyers?
Again, searching for a Business Buyer includes marketing for 1sttime buyers, and experienced business owners for “smaller businesses”. But depending on business size contacting competitors, other strategic buyers, and larger investors are all active applicable business buying prospects.
Thanks to the survey information and IBBA, M&A Sources, Pepperdine Capital Markets Project, and the Graziadio School of Business and Management at Pepperdine University.
For more information please feel free to contact me- Scott Messinger
working with Business Sellers in Greenville South Carolina, Anderson, the entire Upstate and Florida and business buyers throughout the USA and internationally.
I am currently working for business buyers looking for:
:: Salon Greenville SC area
:: Aviation Parts Business S.Carolina
::Business earning $100k+ cash flow in Upstate
::Mfg Business w/$400k+ cash flow in Upstate
::Home Service Business
::Pest Control Business
::Multiple Buyers looking for businesses earning $1M+ cash flow
:: Janitorial Business in Florida
Pack and Ship ANderson SC
Businesses that Want to Sell
Business Owners Have recently Expressed Interest in Selling their business: ….
*Auto Parts online and brick/mortar
*Hair Salon/Spa –
*Sports Bar – SC
*Carpet Cleaning –
Contact me for any
further info on these or more information on selling a business in South Carolina.
September-2017- “Whats Important When Buying or Selling a South Carolina Business
How long does it take to Sell a Business??
I have sold a business in 3 days and one took 3 Years.
I would advise the “average time” to sell a business could be 9-14 months.
If wanting to sell your business next year…. start the process yesterday.
For More info on Selling a Business or Buying a business in SOuth Carolina – Anderson, Greenville, Spartanburg, Clemson, Easly, Greer, Pickens The Upstate and all of South Carolina Florida as well please contact Scott Messinger at:
SC- (864) 210-8226
FL (239) 770-2421
What is my business Worth?
Getting accurate information on Private businesses sold can be difficult. Below I am sharing information on businesses sold during the 2nd Quarter of 2016. This information comes from a survey that includes over 375 Business Broker and Business Professionals involved with buying and selling businesses. I am a 10 year Business Broker working with Business Sellers and Business Buyers in South Carolina Florida and Southeast USA.
If you are considering the sale of your business, planning or preparing an exit strategy from your business or considering buying a business the below information provides valuable insight.
There are many valuable points to be gleaned from the below but a very important underlying point is that businesses are different. You can see the information surrounding what a business sells for, why a business owner sells, who the business buyers are, where a buyer comes from , and why a business buyer buys a business. The size of the business affects all these aspects are very dependent on the size of a business.
A $1M business may sell for a multiple of cash flow of 3,4,5 x- but this doesn’t necessarily mean that a $400k business would sell for a similar multiple.
What is My business Worth? Below chart shows what businesses recently sold for. Please note Buyers Paid a higher multiple of EBITDA (Earning before Interest Taxes Depreciation Amortization ) for larger businesses. A business of say $200K of Ebitda may get 2.5 x that Ebitda, whereas a business with $500k of ebitda may get 4 x ebitda. Cash flow, adjusted cash flow, ebitda, owner benefit, seller discretionary earnings or other related measurement of earnings are a significant factor when determining business value.
South Carolina Business Broker
Why did Business Owners Sell their Business. Are you a South Carolina or Florida Business Owner considering the sale of your business?
South Carolina Business Broker
Who were the Business Buyers during the 2nd Quarter of 2016?
South Carolina Business Broker
Why did Business Buyers Buy a Business in South Carolina Florida and the rest of the US?
South Carolina Business Broker
Where did the Business Buyers come from? Usually they come from somewhere else. For me as a South Carolina Business Broker and Florida Business Broker the last 10 business I sold the buyers on all of them came from distances of 200-1000 miles away.
South Carolina Business Broker
Scott Messinger is a Business Broker Based in the Upstate South Carolina with main offices in Florida and working with South Carolina Business Sellers, Florida Business Sellers, and business buyers and Sellers throughout USA.
For more information Please contact me at (864) 210-8226 or (239) 770-2421 or Scott@GatewayBusinessAdvisors.com
How to Sell a Business – What Matters
Selling a business can be a difficult process. Knowing How to Sell a Business and what matters greatly increase your chances of a successful Sale and transition. Someone may walk in your office one day and offer you 100% cash at an elevated valuation but that is not very likely at all. I had owned a business in a very fast growing industry and I was presented with a couple very strong cash offers at fairly lofty valuations but these offers where based on the growth curve of the industry and market conditions overall. I wasn’t ready to sell my business at that time and several years later when I was ready to sell, the process of selling the business and finding the right buyer and transition for my business presented a much different challenge.
Ive been involved with the business acquisition process for over 25 years as a Business Buyer of Multiple businesses, a business Seller, and as a Business Broker assisting others. I find the following to be important when both Selling a Business and Buying a Business.
- The quality of the business is important- “We are the highest rated Window Washing business in Jacksonville”
- The quality of the industry is important – Are you in a growth industry? or a Mature industry ? “A rising tide raises all ships”
- The quality or the overall marketplace we all conduct our business in is important. During our recently experienced recession obtaining money to finance an acquisition was difficult and overall number of business sales were down significantly.
- The timing of when your business may be best ready to sell and when you as a business owner are ready to sell may not coincide.
As you can see some aspects that affect the likelihood of successfully selling your business may reside out of your immediate control. But knowing more about the process, How to Sell a Business and What Matters, and the current market can only aid in your decision making process.
A Recent survey of fellow business broker professionals involving 100’s of business broker professionals denote consolidate information regarding Buying a Business in South Carolina, Florida and the entire US as well as Selling a Business in South Carolina, Florida and the US. Topics in this survey included information regarding who is likely to buy your business, why will they buy your business and what will they pay for your business. All businesses have differences yet many businesses share similarities:
Why Will You Sell Your Business?
Who will Buy your Business?
Why will they Buy your Business?
What will they Pay For Your Business?
The amount that Buyers are paying for Businesses ( as a multiple of earnings or cash flow has remained fairly constant over the last few years.)
SDE- Sellers Discretionary Earnings
EBITDA – Earnings Before Taxes Interest Depreciation and Amortization
So, Timing, knowing who you may best market your business to, what sort of value expectations you can expect all affect the likelihood of a successful business sale and transition. There is a lot to knowing How to Sell a Business but getting ready to sell your business and knowing when you are ready are are a couple of the very important 1st steps.
Above data provided by survey of over 300 business brokers throughout the USA coordinated thru International Business Brokers Assn and M&A Source and Graziadio School of Business.
Looking to Sell a Business in South Carolina Florida or SE USA or looking to Buy a Business in South Carolina Florida or SE USA please contact me Scott M Messinger at Scott@GatewayBusinessAdvisors.com or directly at for more info see www. SellaBusinessAdvisors.com
Running a business, owning a business, buying a business, or starting a business requires a whole toolbox of skills, efforts, attributes, timing and possibly some good fortune. It is well documented that to successfully own a business buy a business or start a business requires skills such as:
- Being Driven
- a “Do whatever necessary” attitude
- Willingness to experience failures but not accepting failure as an option
- Financial ability
- Leadership skills, sales, marketing, the list can go on an on.
There is a new requirement that a small business owner needs to be part of his/hers skill set- the ability to tread water.
New Business Skill – Treading Water
Running a business over the last several years has required the small business owner to attain the skill of “treading water”.- And for this discussion I am defining treading water as the ability to “hang on” to the businesses until the economy recovers. And when one looks at our economy from a Main Street perspective in lieu of a Wall Street view, the need for one to be able to tread water for a couple more years may be needed.
My definition of a small business is not how the government defines small business, rather the millions of businesses with 50 or less employees (and the many with 5 or less employees), that currently are working harder to end up with less and essentially try to hang on until the economy turns around. Recessions don’t last forever?- right?
- Photo (c) illustraconsulting.com
A Rising Tide lifts all Boats…. I recently had been on an Alaska Fishing trip , and fishing up there is all about the Tides, and you plan and your time your fishing activities around them. But the tide you can count on. The boats and the docks are floating piers which allow the boats to move up and down with the Tide. Every whatever hours, tide comes in a raises all the boats about 15 feet higher, tides leave all boats go lower. One day the economy will improve and the vast majority of businesses will benefit (rise) from this improved situation.
But for how long can the small business owner tread water until the economy improves overall consumer spending, a beat up housing market, and significant unemployment problems. As a business broker I engage in confidential discussions with business owners and hear the stories of small business owners using the high rate credit cards to help finance the business.
I talk with the small business owner that “owns” the building he operates , yet is so upside down on the building that turning that “asset” back into an asset is a remote possibility at best. Most all payroll cuts have been made, some have moved into small leased spaces, others have long since made adjustment to personal and business expense spending to adjust to these difficult times.
Treading Water…. How Much Longer
How long will the small business owner need to tread water for? We all know it is prudent to have savings/reserves for backup and or down days, but how long can reserves hang on for. “Business Owner A” may be able to “tread water” for 1 year yet”Business Owner B” may be able to tread water for 2 years- then what? The previous business I had owned for 20 years did go thru multiple recessions. If you own a business for any duration of time you will experience the economic cycles that do occur. This recession is so very different.
As a small business owner currently working as a business broker in Florida, I continue to look at newer/better ways to conduct my business activities in this environment.hings that worked 2 years ago, may not work now. It will be nice one day when the tide comes in and raises all boats, but in the mean time I focus on improving my situation.
I expect no help from government, banks, or others, waiting for help from those entities, to me is like waiting for a tide on a land-locked pond. People and business are still buying and selling businesses but at a much slower pace than several years ago. So like all the small business owners I work with, I have to work more for less. How long can these small business owner tread water until conditions improve- I see and talk with so many that are getting very tired.