Selling Your Small Business? 3 Tips for Making the Deal you Want

There are hundreds of thousands of small businesses available for purchase yet 80% won’t sell. Many businesses are overpriced, the asking price is solely based upon the owner’s desire to make x amount of dollars. How do you ensure a successful sale and the best return on what is likely your most valuable financial asset? These critical decisions are among those for which owners are least prepared since they may be confronted only once in a lifetime. Owners may have decades of experience at managing their business but little to no experience with the complex process surrounding their exit.  Every business owner leaves their business, either by death, sale, closing or succession. Which way do you want to leave? Here are 3 tips to increase your shareholder value and close the deal:   Timing: Early planning is essential Although every business will be faced by the owner’s exit, very few small business have a liquidity or transition plan in place. Caught in the day-to-day management, they fail to recognize it is already time to think about their exit. As a result, they react to a life event, aging, illness, etc., and do not harvest the fruits of their life labor through a proactive strategy. A sufficient time-frame, generally between three to seven years, will dramatically increase your leverage and consequently your return.   Value drivers: Objectively assess your business A small business owner’s life is often so intricately intertwined with the business that it makes it very difficult for them to objectively and effectively assess the value of the business. A professional third-party assessment will identify the business’ value...

How Much Money Is Your Business Worth?

I help business owners find an ideal buyer for their business everyday and the foremost question on all buyers and sellers mind is how much money is the business worth? The answer to that questions is a business is worth exactly what a buyer is willing to pay for it. Interestingly, there is actually a method to finding that magic number and that’s exactly what I will explain in this article. We will first need to find the Seller Discretionary Cashflow in order to properly value the price of a business. Seller Discretionary Cashflow is a term used to describe the money that a business owner actually benefits from in its entirety. This basically takes into account the Net Income plus any expenses and deductions considered to be of benefit to the business owner. Examples of such expenses and deductions also referred to as “Add Backs” are: compensation to the owner, amortization, depreciation, certain inventory losses, a health insurance plan, a car payment, a mobile phone payment or even entertainment. It is fairly easy to determine Seller Discretionary Cashflow by simply reviewing a recent Profit & Loss of the business. Let’s say a Bed & Breakfast had a tax return profit of $50,000.00 which would be the starting point for several add backs. For instance, if the owner was paid a salary of $40,000 and the business had $15,000 in depreciation, $15,000 in amortization, $8,000 for a personal vehicle, $2,000 for a cell phone PLUS Dry Cleaning, Clothing, Entertainment, Travel of $15,000 the Seller Discretionary Cashflow would be $145,000.00 Once you have the Seller Discretionary Cashflow now it is...

Which Type Of Lender Is Right For You?

There will come a time when you will seek capital to help grow your business! It is important to understand that you have options, choices and you decide what, how, when, who, where you receive the capital from. Options mean what types of capital available to you. Choices refers to programs, what type of capital you want, how refers to amount of capital you need, when refers to when you would like to receive the capital, who refers to which company you want to do business with and where refers to lenders location, ability to service, etc. In understanding this we have assembled an overview chart of broker vs. direct lender to educate you so the best decision can be reached. Here is why you should consider each: Options: Brokers will have multiple lenders for multiple loan products. Multiple lenders mean better bargaining position regarding rates, terms and fees. Direct Lenders will only have access to their loan programs.  As brokers Altima is consistently able to achieve better terms, rates, etc. for our clients by negotiating one lender against another. Timeliness: A brokers ability to quickly place an applicant with the correct lending source based on lenders criteria means quicker funding. Direct Lenders have to lump everyone into their specific guidelines and if you don’t fit, they cannot provide you with the necessary funds, meaning wasted time. Every lender has a different risk tolerance and appetite. I.e. Construction Vs. Retail, 800 Fico Vs. 520, etc. It’s important to know this for effective and time efficient outcomes. We research lenders loan programs to ensure borrower meets their guidelines for faster...