Buying and Selling a Business
When buying and later selling your business, there is sure to be a long list of concerns you want to address throughout the process. Seeking expert help from an unbiased team with experience in business buying and selling helps alleviate stress and increases success rates.
Buying and Selling a Business
A lot goes into buying and selling a business, and there is a lot to consider to make what can be a complicated process a success. There is a lot of money to be made if an entrepreneur can successfully navigate choosing the right business to purchase and completing the steps necessary to sell at a higher valuation.
Choosing the right business opportunities, securing the financing and making an offer, improving the multiple, and finally increasing the valuation to sell at a higher price are just the surface-level steps. There is any number of ways that the process can go awry. Rest assured that with expert guidance, it is possible to create a successful business out of buying and selling already established businesses.
How to Start Buying and Selling Businesses
First, entrepreneurs seeking to buy an existing business to sell for a profit should have clear goals. The goals of an entrepreneur seeking to buy an established business to sell for a profit differ from those who choose to buy a business to run it themselves and help it grow for the long term.
Buying and selling a small business is not a process to be rushed, but the goal should be to avoid drawing it out. Small business owners should understand the importance of educating themselves on the obstacles they may face while seeking advice and mentorship from experienced coaches. Determining the type of business best suited for the individual, taking steps to prepare financially, designing opportunities for growing the business, and being wary of potential pitfalls are ways for the successful entrepreneur to reach the ultimate goal of turning their investment into a profitable sale.
Buying and Selling a Small Business
Enter the arena of buying and selling a small business by first understanding the basics of business brokerage. Consider the financial, legal, and tax implications accompanying business buying and selling.
Consulting experts in accounting, tax law, business brokering, and coaching with experience in business valuation, growth, and selling are necessary for successful transactions. These experts are like a lighthouse for an entrepreneur at sea, keeping them on target and safe from rocky shores that can cause costly errors.
Start by Searching for Good Business Opportunities
Not every business for sale is a good business opportunity. A small business entrepreneur should be prepared to ask the right questions when searching for good business opportunities. Working with a coach and a business broker can help identify where to look for good business opportunities and the best questions to ask the existing owners.
Entrepreneurs would be wise to avoid a business purchase based solely on favorable data. In addition to considering the skills and lifestyle of the purchaser, profitable business opportunities require that financial affairs are in order, liabilities are limited to necessities, and assets are plentiful. The goal is not to find a perfect business available for purchase, because there will always be some risk level in a business purchase. However, examining valuation reports, asking questions about operations, learning about inventory, addressing the challenges of competition in the industry, and so on with the help of the team of experts assembled will allow the choice to come with more ease.
The most valuable businesses do not need the owners' attention every day; instead, they are self-contained. They have talented people in key roles that are self-directed, handle the day-to-day operations, and drive a strategic growth plan that gets results.
It is also necessary for potential buyers to determine how much they are willing to pay for an existing business. Knowing this will help choose the right opportunity and further assist in leading negotiations in the next step.
Make an Offer to Acquire the Business
Once a small business buyer has identified a good business opportunity to acquire, it is time to move forward with making an offer. This stage requires skillful negotiations to obtain the business at a reasonable price and with favorable terms for the buyer. Business coaches, brokers, and lawyers help assist in these negotiations, as this is the stage that many business acquisitions can fall apart, placing the entrepreneur back at square one and looking for a new opportunity.
Entrepreneurs looking to buy a business need to ensure their financial affairs are in order at this stage. Keeping in mind that 'time kills deals' and being ready to perform quickly in a purchase is critical to securing a great business. When buying a business, it is also important to remember that the buyer will be writing several checks. Outside of legal and broker fees, the largest checks written are for the purchase of the business and the working capital to operate it. The business buyer who assumes the working capital risk associated with taking on that business can provide leverage in negotiating price and terms. Experts can assist in drafting a letter of intent (LOI) and later a business purchase agreement (BPA), ensuring that there are no missed opportunities and mistakes are limited.
Considering the information obtained during the searching stage, entrepreneurs can use the relationship developed with the current business owner to make an acceptable offer but also leaves room to improve the business profitability through strategic advancements.
Implement Strategic Advancements to Improve Your Multiple
In researching the business before making an offer, an entrepreneur-turned-owner of a small business has already gained valuable knowledge of the operations and can identify where to make advancements to improve the business profits and multiple. This opportunity for improvement in the multiple increases exponentially when seeking advice from a coach experienced in growing a business.
Evaluating the multiple of a business is done by looking at the earnings before interest, taxes, depreciation, and amortization (EBITDA). The EBITDA is a part of a business valuation report. In simpler terms, strategies to improve the business multiple and value involve increasing business earnings while decreasing costs and expenses. Specifically, looking for opportunities for income that the previous owner may have missed and capitalizing on growth using the existing assets in the business are good ways to improve the multiple.
The process of buying and selling a business for profit is reliant on increasing the multiple and value. Taking care to reduce expenses, utilize resources effectively, and increase revenue allows small business entrepreneurs to reach their financial goals when they turn around to sell.
Sell the Business at a Much Greater Valuation
Entrepreneurs who rely on their trusted team of advisers can objectively value their business assets, the business earning potential, and the market value compared to similar businesses in the industry. Realistic valuations are a measure of the success achieved in growth when compared to valuations before their acquisition.
After implementing strategies to improve the multiple and increase the valuation of the business, an entrepreneur has another set of concerns to address when getting ready to sell. Maintaining the business valuation throughout the selling process is essential for the completion of the sale. Retaining valuable employees who are assets to smooth transitions between owners is one part of maintaining value. Maintaining value also involves ensuring all financial and organizational ducks are in a row. Having financial statements in order, revenue streams remaining consistent, and not taking on new liabilities help the valuation of the business when ready to sell.
Considering the structure of the business and related tax implications are important aspects to address as well. These considerations are done best with assistance from a tax professional knowledgeable in the complications of business tax law. How to structure the sale, attract the right buyer, and meet financial goals are questions the business seller will want to address with expert help.
Selling the business at a higher valuation for a profit is achievable when concerns and potential areas for failure are addressed with the help of knowledgeable business brokers, tax professionals, and coaches.
Business Buying and Selling Guidance from Coachwell!
Business buying and selling can be daunting if you try to take on the process alone, but it does not have to be when you seek out the best team of experts to assist in the process.
Coachwell's team of business coaching and advising experts can assist in the journey of buying and selling a business for profit. With over two decades of experience helping entrepreneurs reach their goals, you can trust the team at Coachwell to make your success their success. Their personalized attention to your needs as an individual, entrepreneur, and business leader has proven results in selling a business for profit and smoothly transitioning to whatever comes next. Contact the team to get a clear picture of your goals and learn how they can help you find the most successful solutions to reach them.
