• Buyer FAQs

    Questions Frequently Asked Prior to the Purchase A Business

    Should I buy an existing business or start my own?

    When you purchase an existing business, you're purchasing that company's future revenue and profit stream. It has a track record and is relatively predictable. Here are some advantages to buying an existing business:

    • Existing cash flow
    • Established customer base and market share
    • Proven business model
    • Brand identity
    • An infrastructure is already in place
    • Trained employees and established vendors 
    • A wider variety of financing options

    Buying an existing company is often the preferred pathway to entrepreneurship versus starting a business from scratch (a startup).

    How is the value of a business determined?

    Typically, an initial evaluation of the business is conducted by the business broker. The seller's feedback is considered but the evaluation is accurately derived by assessing the business' financial records, assets (equipment, property, etc.), goodwill and operations. Additional factors often considered include location, market conditions and competition. All of this information is calculated to determine a price range and the business is then listed. The price range, high and low, is contingent on the payment terms (e.g. seller-financing, cash requirements, etc.). When an offer is made and price and terms are agreed to, the buyer then has time to perform due diligence in order to confirm the valuation of the business and complete the transaction.

    How do I finance the purchase of a business?

    Purchasing a business can be financed in a variety of ways. The three main components include the buyer's investment (equity), seller financing and or any other third-party financing. Small Business Administration (SBA) loans are common as are retirement funds. They may be used without penalty to begin a business.

    I'm interested in buying a business. What happens next?

    Once you've made the decision to purchase a business, beginning the search process online is usually the next step. Refining your requirements and understanding what's available will provide context for your upcoming investment decision. There are many resources to assist you in that process. Alternatively, you can contact Acme Business Brokers. Once we understand what you're looking for in your new business, we can match you with our list of present opportunities.

  • Seller FAQs

    Questions Frequently Asked Prior to the Sale of Your Company

    Why should I work with a Business Broker to sell my business?

    In the United States, just over a million business for sales are for sale at any given time. Of these, ninety percent are offered “for sale by owner”, also known as FSBO’s. Of these, over 50% of the businesses that sell are sold through Business Brokers according to the U.S. Department of Labor and the SBA.

     

    Business owners will often pursue a FSBO approach to selling their business. They usually do this in an effort to avoid paying a commission to a Business Broker. The short term concern of paying a commission is overshadowed by the benefits of having a professional Business Broker working on their behalf. The fact is, engaging a Broker has many advantages including:

    • An understanding of potential challenges in business transactions
    • A commitment to work in the best interest of both buyer and seller
    • A professional responsibility to maintain strict confidentiality
    • An interest in qualifying potential buyers for expertise and financial fit
    • Expertise to advise regarding potential financing options
    • They can increase the cash that remains in a seller’s pocket following the sale

    This professional level of service enables the business owner to continue to operate throughout the transaction while successfully securing the right buyer.

    How much does it cost to list and sell my business with a Broker?

    The seller usually pays for the services of a Business Broker, with a commission fee arrangement, which is detailed in a listing agreement and paid at closing. Increasingly, Brokers collect a partial up-front fee to advise, defray initial expenses associated with marketing and optimizing the business for sale. The commission amount is dependent on what the seller and Broker agree to and is typically between 8 to 12 percent of the selling price. Generally, the smaller the business, the higher the commission percentage rate. If the Buyer was introduced to the business by a different brokerage - not the listing Broker, the commission is divided by the listing and the selling Brokers,. Occasionally, a buyer will engage a Broker to help search for and purchase a business. Under those circumstances the buyer pays an agreed upon amount (usually a negotiated flat fee), depending on the size and complexity of the transaction.

    How long will it take to sell my business?

    Most Business Brokers agree that it takes between 6 and 12 months to sell a company (9 months on average). According to industry statistics, a series of business brokers were surveyed and their information showed that 28% of all Brokers indicated it takes 6 months or less to sell a company. 31% of all Brokers have indicated it takes 9 months while 21% of all brokers say it takes 12 months. Only 10.5% of them said it takes over a year to sell a business.

    How will my business' value be determined?

    There are two cursory methods for approximating the value of a business. The first is to apply a multiple to the cash flow of the business, the second is to apply a percentage to the annual gross revenue of the business. The most accurate of the two seeks to approximate the value of a business by applying a multiple to the company’s discretionary cash flow. What is discretionary cash flow? It is not the profit or loss that you show on your tax return. Discretionary cash flow is the total cash that the business generates, in a year, that is available to the owner after deductions for necessary operating expenses. Another way to define discretionary cash flow is the “total owner’s benefit” derived from owning the business, regardless of how the owner takes the money out of the business. Almost all privately held businesses will appraise for somewhere between one to five times discretionary cash flow (DCF). Where a business falls in this range depends on the type of business.

    What about confidentiality?

    Reaching your exit goals is important for the success of your business post-sale. If word gets out to your creditors, customers, competitors or employees, it could trigger a negative reaction, weakening your business momentum and therefore its value. Moreover, prospective buyers may become hesitant about purchasing your business if they feel sensitive information has been shared with others. Once marketing begins for the sale of your business, confidentiality can get tricky. The risk can be lessened considerably when you choose to work with a Business Broker. Business Brokers are experienced at fielding inquiries from would-be buyers and reaching out to prospects without ever mentioning you or your company name.

    How will you advertise my business?

    Business brokers utilize specialized tools to communicate the details of your business to potential buyers. With confidentiality as our main consideration, a unique formula of affiliates, proprietary databases, websites and other media are leveraged to communicate the details of your business opportunity.

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