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Certified Business Broker Robert Dean will value, market and SELL your business!

There are hundreds of variables in selling a business and it is the Broker’s job to pay close attention to all of the details to make sure the business transaction is a smooth one.

There are many benefits in using a Certified Business Broker when selling your business. One of the main reasons is to free up the owners time so he can concentrate on running the business and a high level.

Another very important factor is the confidentiality aspect involved with the sale. By not using a Broker, an owner risks loosing key clients, vendors and employees.

So how else can Los Angeles Business Broker Robert Dean help?

  • Review and recast the business financials to show the true profitability of the company, and to determine an honest value range for the asking price. A Certified Broker will explain exactly how the value was established.
  • Write a comprehensive Business Review and Presentation Package to increase the marketability of the business.
  • Will handle all advertising and marketing to attract buyers nationwide.
  • Will pre-screen buyers to make sure that they are both financially and financially qualified to buy the business
  • Schedule and monitor all buyer/seller meetings.
  • To obtain SBA financing for qualifying businesses.
  • Handle all negotiations with offers and counteroffers on the business.
  • Will assist with the Due Diligence process.
  • Los Angeles Business Broker Robert Dean will assist with the sales transaction from the beginning process through the close of escrow.

These are just a few of the many benefits of using a Certified Business Broker. Selling a business differs from selling Real Estate. Most of the value is intangible and requires a trained expert to realize and quantify it.  

If you have any questions about selling your business, please contact Certified Business Broker Robert Dean, CBB at Banner Business Sales, Inc. Phone: 310-709-1985. Email: info@bannerbusinesssales.com Website: www.BannerBusinessSales.com

Make sure your business records are organized for a buyer.

Not only is it important to keep good Books & Records to run a successful business, but it’s also very important to have accurate Books & Records to sell a business.

I have dealt with business owners with both immaculate books & records and horribly inaccurate books & records. If your looking to acquire a business, which business would you rather buy? It is very difficult to properly value a business with poor books & records and it will ultimately hurt the value of the company.

If you want to get top dollar in selling your business, then make sure you have a solid grasp on your company’s business financials. Make sure you have accurate Profit & Loss Statements and Tax Returns for a minimum 3 years. A buyer will also want to examine the Balance Sheet, General Ledger and Bank Statements, etc..

  1. If you don’t have a Profit & Loss, this is where I would start. This will show a buyer exactly how your company's cash flow affects the business. Keep it Simple. Show your Gross Revenue, Cost of Goods Sold, Gross Profit, Company Expenses, and Net Profit.
  2. The Balance Sheet is a snapshot of your business at an exact period of time. This will show a buyer the company's Current Assets, Accounts Payable, Accounts Receivables, Current Liabilities, etc. This will greatly help if the business handles a lot of inventory and uses a lot of equipment.
  3. Tax Returns will needed and will also be sued to secure SBA or Bank financing.
  4. Your General Ledger and Bank Statements should corroborate your cash flow of the business. This is one of the primary items a buyer will look at during Due Diligence.

The more confident the buyer is in the owner's financial information, the more likely they will purchase the business closer to the asking price.

So if you're thinking about selling your business, make sure that the all of your financial documents are in order to help make the sales transaction a smooth and prosperous one.

If you have any questions about selling your business, please contact Certified Business Broker Robert Dean, CBB at Banner Business Sales, Inc. Phone: 310-709-1985. Email: info@bannerbusinesssales.com Website: BannerBusinessSales.com

Finding the right buyer for the right business is the key to a successful transaction.

Finding the right buyer for the right business is the key to a smooth sales transaction, and also contributes to the continued success and growth of the company.

When selling a business, you want the most qualified person to purchase your company. Finding the right buyer is the key to a smooth sales transaction, and will also contribute to the continued success and growth of the company.

When qualifying a buyer, you want someone who is both financially capable, and also someone who has the business knowledge & experience to take the company to the next level.

Business Brokers will look at many aspects of the buyer in order to qualify them. The key is to make sure that they are the right fit for the company. In regard to their business experience, a broker will examine several factors, including:

  • Educational Background
  • Have they owned a business
  • General Management Experience
  • Marketing & Sales Experience
  • Operational Experience
  • Inventory Management
  • Do their skills compliment the company
  • Communication & Customer Service skills

In regard to their financial qualifications, a Business Broker will also look at several different factors, including:

  • Net Worth
  • FICO Score
  • Income Requirements
  • SBA Requirements
  • Any Bankruptcies or Foreclosures
  • Down-payment
  • Any Judgments filed against
  • Are they Currently Employed

Selling a business is a painstaking process and may take 6- 9 months to complete a successful sales transaction. Finding the right buyer is one of the many challenges a Business Broker has to deal with. In order to protect a seller, a good Business Broker will examine the buyers qualifications before they will disclose any information on the business. A broker wants to make sure that the buyer is fully capable of not only of purchasing the company, but also of successfully running the business.

It is our goal to find and match the right buyer with the right business.

If you have any questions about selling your business, please contact Certified Business Broker Robert Dean, CBB at Banner Business Sales, Inc. Phone: 310-709-1985. Email: info@bannerbusinesssales.com Website: BannerBusinessSales.com

Preparing for the sale of your business.

If you are thinking about selling your business, it would be greatly beneficial to catalog all of your assets in order to help facilitate a successful sales transaction. One of the first lists an owner should make is his FF&E List (Furniture, Fixtures & Equipment). A business value is calculated in part by its list of assets. The more you can substantiate your asset value, the more it can increase the overall business value. Selling a business differs greatly from selling real estate. Part of the value is intangible and requires a trained expert to realize and quantify it.

Some of the assets that a seller needs to address include:

Equipment: Is the equipment old or new? What condition is it? What’s the replacement value?

Trade name, Trademarks, & Patents: Does your name and product represent value to your customers?

Inventory: How much inventory do your have? What condition is it in? What’s the value?

Customer & Database Contacts: How many contacts do you have? How many are repeat customers?

Key Employees: Will a Key Employee stay on with a new owner? Will any customers be lost by replacing a Key Employee?

The Lease: What are the terms & conditions of the Lease?

Business Records: You might not think of your financials as a hard asset but if you have excellent books & records, you will more likely stay close and validate your asking price.  Positive Cash flow is the most common measure of the Good Will component of a Business’s Valuation.

In order to calculate and understand the overall value of a business, you need to look at many different aspects of the business. As a Certified Business Broker, I look at the many variables, including assets, both tangible and intangible, in order to properly value a company.

If you have any questions about selling your business, please contact Certified Business Broker Robert Dean, CBB at Banner Business Sales, Inc. Phone: 310-709-1985. Email: info@bannerbusinesssales.com Website: BannerBusinessSales.com


Selling Your Business?

Small Business Transactions Up 18%, Sellers Earn Higher Sale Prices, According to BizBuySell.com Report

BizBuySell.com’s Third Quarter 2014 Insight Report shows transaction levels still on pace for record-breaking year, sellers now receiving a higher percentage of asking price and improved cash flow multiples

San Francisco, CA – BizBuySell.com, the Internet’s largest business-for-sale marketplace, reported today that third-quarter small business transactions remained at historically high levels. The full results are included in BizBuySell.com’s Q3 2014 Insight Report, which aggregates statistics from business-for-sale transactions reported by participating business brokers nationwide.

A total of 1,987 closed transactions were reported in the third quarter this year, representing both a 17.9 percent increase from last year and the highest number of small business sales recorded in a third quarter since BizBuySell began tracking data in 2007. In fact, this quarter’s numbers slipped just 2.1 percent from the second quarter of 2014, which remains the most active quarter for small business sales since before the recession. It also keeps 2014 on pace to record the highest number of small business transactions since the report’s inception.

“After seeing a return to robust transaction activity during 2013, it’s good to see that we have not plateaued and both buyers and sellers are still eager to make deals happen,” said Bob House, Group GM of BizBuySell.com and BizQuest.com. “There remains a strong supply of quality small businesses on the market. As the economy and financing options continue to improve, buyers remain very interested in acquiring small businesses.”

Financials Show Market Shift Beginning to Benefit Sellers

While the post-recession market has generally favored buyers, a shift appears underway, with sellers now receiving higher sales prices. The median sale price for businesses sold in the third quarter rose 5 percent compared to last year, increasing from $180,000 to $189,000. Meanwhile, the median asking price remained virtually unchanged, rising just 0.5 percent from $199,000 to an even $200,000.  This means sellers in the third quarter were able to receive roughly 95 percent of their asking price, the highest percentage we’ve seen since the recession hit in mid-2008. Active sellers appear to be taking notice of the market change as the median asking price of businesses listed on BizBuySell.com also increased 4.3 percent in Q3.

Sellers’ increased negotiation power is likely a result of stronger small business financials. Both the median revenue and median cash flow of businesses have risen each quarter of 2014, and were up 1 percent and 2 percent respectively in the third quarter.

But perhaps even more telling is how much sellers are receiving in relation to their revenue and cash flow. The average revenue multiple grew nearly 6 percent this quarter compared to last year, now up to .62. At the same time, the average cash flow multiple jumped even higher, up nearly 9 percent to 2.38.

While buyers are still receiving good value for their investments, rising multiples show that sellers are now successfully translating their financial growth into higher sales prices. It’s a sentiment we also saw sellers express themselves in BizBuySell’s recently released Buyer & Seller Confidence Survey (link is external). The study revealed sellers are more confident they will receive an acceptable sales price this year than they were last year. In fact, 21.2 percent of sellers said they were “very confident” they could sell at an acceptable price, a 20 percent increase from those who felt the same in the 2013 survey. Nearly 47 percent of those that were more confident this year credited improving business financials as the primary reason, a feeling that is reflected in the rising revenue and cash flow data this quarter.

“After hearing sellers voice their confidence in the survey and now seeing this transaction data support their claim, it certainly appears some momentum is shifting back towards a balanced market,” House said. “The supply of small businesses being listed is still growing and we believe it will continue to be a great time for both buyers and sellers to enter the business-for-sale market.”

Even with increased seller confidence, buyers also remain generally confident with 78.6 percent believing they can buy at an acceptable price, according to the same survey.  Improving lending conditions and the overall growth of the economy are helping buyers meet the higher demands of sellers. Buyers are also benefiting from the increasing number of sellers willing to offer seller financing in order to push deals through. In the BizBuySell Confidence Survey, nearly 30 percent more sellers planned to take on part of the financial burden through seller financing than planned to in 2013.

More Manufacturing, Service, & Restaurant Businesses on Market

In addition to an increasing number of closed sales in Q3, there were also a growing number of businesses listed for sale.  Total listings were up 2.2 percent from the same time last year, with the most notable growth in manufacturing businesses (up 4.1 percent), service-industry businesses (up 3.9 percent) and restaurants (up 3.5 percent).

These sectors also saw an increase in the number of closed transactions. Service-related businesses led the way with a 17 percent increase while manufacturing was up 16.2 percent and restaurants up 13.3 percent compared to last year.   The overall mix of sold businesses remained consistent with last quarter as shown below.

High Transaction Activity Likely To Continue Through End of 2014, Into 2015

As mentioned above, 2014 remains on pace to record the highest number of closed transactions reported since the BizBuySell Insight Report inception in 2007.  There is increasing supply and demand in the market, and if this continues as expected, both buyers and sellers will be confident enough to enter the market. In fact, in our recent Buyer & Seller Confidence Survey, 95 percent of buyers and 75 percent of sellers hope to close a deal in the next 1-2 years.

“It’s an exciting time in the business-for-sale market as conditions continue improving and that growth is being reflected in both the financial and total transaction data of small businesses,” House added. “We’re excited to see what 2015 brings to the market.”

If you have any questions about selling your business, please contact Certified Business Broker Robert Dean, CBB at Banner Business Sales, Inc. Phone: 310-709-1985. Email: info@bannerbusinesssales.com Website: BannerBusinessSales.com

Valuing a Business using SDE and EBITDA

 SDE & EBITDA 


(Sellers) Discretionary Earnings (DE)

Discretionary Earnings are the adjusted earnings before taxes, interest income or expense, non-operating and non recurring income/expenses, depreciation and other non-cash charges, and prior to deducting an owner's/officer's compensation. 


EBITDA

EBITDA stands for earnings before interest, taxes, depreciation and amortization. EBITDA is essentially net income with interest, taxes, depreciation and amortization added back to it. EBITDA can be used to analyze and compare profitability between companies and industries because it eliminates the effects of financing and accounting decisions. 


DE vs. EBITDA
The difference between DE and EBITDA is the amount of fair market compensation that would be paid to the working owner or manager of the business. 


The Equation

DE = EBITDA + one normal owner

EBITDA = DE - one normal owner


Read more: EBITDA - Earnings Before Interest, Taxes, Depreciation and Amortization http://www.investopedia.com/terms/e/ebitda.asp#ixzz4lcPdgvnU 


If you have any questions about selling your business, please contact Certified Business Broker Robert Dean, CBB at Banner Business Sales, Inc. Phone: 310-709-1985. Email: info@bannerbusinesssales.com Website: BannerBusinessSales.com


What Is Your Business Worth?

To determine the value of a business, a Business Broker needs to fully understand all aspects of the business. The Broker will interview the owner and ask many, many questions to gain as much insight into the business operations. The goal of the business owner is to show minimum profits so they pay as little in taxes as possible. But the goal in getting a higher sale price is to show a higher cash flow. So how do you value a company whose financials show little to no profit?

As a Certified Business Broker, it is our job to learn as much as possible about the business, especially when it comes to examining the financials.  Our goal is to find out the true profitability of the company. A small to medium sized business will usually be valued by the Seller's Discretionary Earnings. This method is used to arrive at a realistic selling price and is based off the adjusted profit & loss statements. These adjustments in the profit & loss statement consists of adding back the business's unnecessary expenses that are not essential to operate the business, such as the owner's health insurance payments, personal car expenses, one-time non-recurring charges, etc. These non-business related expenses are added to the owner's salary and the net profits to show the true profitability of the business.

Most small to medium-sized businesses use the Income Based method by using a multiple of the Seller's Discretionary Earnings. The value will usually be a 1 to 3 times multiple of the discretionary earnings. This will give the seller a suggested selling price range. There are a lot more variables that go into valuing a business and it's the brokers job to fully understand the business and to explain to the client how the value was formulated

But as I tell all my clients, regardless of how much a seller thinks his business is worth or what valuation a broker comes up with, ultimately the marketplace will determine what the business will sell for.  

If you're thinking about selling your business, contact Certified Business Broker Robert Dean,CBB for a Free Consultation and Business Valuation. Call 310-793-6757 or email at info@BannerBusinessSales.com


Are Sellers Expecting Too Much?

One of the main reasons why a business won't sell is because the owner places too high of a value on the company. The seller does not take into account what the buyer is thinking. A buyer wants to know how long will it take to get a return on his investment, what are the risks involved, and what exactly he is buying. Does it make sense for the buyer to purchase the business? Is the buyer paying all cash or will he need a loan. If the buyer is obtaining a loan, they will need to analyze the cash flow and see if they are able to service the debt, and how long it will take to recoup their investment. Does a buyer want to wait 7 years to get a return on his investment? In most cases, No.

Obtaining a new lease from the landlord can also hinder a business sale. Not getting the terms that makes sense for a buyer such as length of time so a buyer can recoup his or her investment, or a significant increase in the rent which will diminish the discretionary earnings of the seller.

A downward trend of revenues will affect the profits and cash flow. A buyer will wait and see if the trend continues and if so, will most likely purchase the business at a significantly lower price or not at all.

Another very important aspect of a business sale are the financial records. Inaccurate or incomplete records can be disastrous to the seller and the business sale. It is crucial to have accurate records to show the buyer exactly how the business is operated.

Does a significant amount of your company’s revenue come from one or two clients? Do you have solid contracts with these clients? If not, and if they decide to not do business with a new owner, the company’s value is greatly depreciated.

 Can your business operate on its own? Buyers place a higher value on companies that can run themselves. An owner should delegate more of his or her responsibility to employees so the company relies less on the owner.

Is the business in a declining or obsolete industry such as video rentals, or is big competition driving out small mom and pop stores such as Staples has done to small stationary stores.

Does the Seller and Buyer get along. I had one of my business owners tell me that he doesn’t care about the buyer and he "spits in his eye". Deals have been killed due to seller/buyer dislike for each other.

These are just some of the reasons why businesses don’t sell. And according to BizBuySell’s 2014 Insight Report, they have about 30,000 businesses at any one time and there was 1,650 to 1,890 transactions closed per quarter over the last five quarters. This means that only about 4 or 5 percent of the businesses listed on the site are being sold in any one quarter.


If you have any questions about selling your business, please Contact Certified Business Broker Robert Dean for a Free Business Consultation. Banner Business Sales, Inc. Phone: 310-709-1985. Email: info@bannerbusinesssales.com Website: BannerBusinessSales.com

Increase The Value & Sale-Ability Of Your Business.

If you're thinking about selling your business, here are 7 proven tips to help increase the value & sale-ability of your business.

1. Organize and check your Business Financial information. Have 3-5 years of Profit & Loss Statements, Tax Returns and Sales Tax Receipts. The more organized and accurate your records are, the higher sale price will be received.

2. Create lists of FF&E (Furniture, Fixtures & Equipment) and Inventory, with their estimated fair market values.

3. Can your business operate on its own? Buyers place a higher value on companies that can run themselves. Create operating manuals and delegate responsibility.

4. Does your company have a website? If not, you should build one. Buyers know the considerable value of having an online presence.

5. How's your curb appeal? Just like a home, the appearance of your business can affect the value.

6. Get all your paperwork in order. Get your leases, customer lists, contracts, licenses, patents, trademarks, etc. up to date and ready for the buyer to review.

7. Increase the bottom line. Strive to increase your sales, cash flow and profits. Buyers want to purchase a business with an upward revenue trend.

If you're thinking about selling your business, contact Certified Business Broker Robert Dean, CBB for a Free Consultation and Business Valuation. Call 310-793-6757 or email at info@BannerBusinessSales.com

The Due Diligence Process

Due Diligence is the process that both buyers and sellers of a business sale will perform in order to verify exactly what the other party claims to have in regard to the business or themselves. Due Diligence is a little easier for the seller than the buyer. For the seller, they want to make sure that the buyer has both the financial means and the industry/business knowledge to operate the company. On the other hand, the buyer needs to examine all aspects of the business to make sure that what he is purchasing is exactly what the seller is claiming. Due Diligence is essential in making a sound investment.

Below are just some of the items that should be examined and verified by the buyer:

Business Financials

Tax returns, profit & loss statements, balance sheets, sales & use tax, payroll records, general ledger, check register, bank statements, current A/R & A/P, invoice records, debt obligations & lines of credit.

Management & Personnel

Organization chart, management contracts, employee agreements, procedure manuals, employee handbooks, benefit plans, vacation pay

Lease & Building

List of all real property leases, options, and annual costs, deeds for real property owned, Insurance contracts,

Production

Key Supplier contracts, key customer contracts, current contracts under negotiations,

Customers & Clients

List of customers and client concentration, competitor list, expressed warranties, outstanding gift cards, industry trends,

Proprietary Rights

Patents, copyrights, trade secret agreements, license, royalty and intellectual property rights, infringement of third party of property owned by the company,

Legal

Review all contracts and agreements related to the business. List of any pending litigation, arbitration or any other proceedings involving the company. Description of any violation of any government laws or violations. Workman comp claims.

FF&E

Current Furniture, Fixtures and Equipment list with make, model, year and condition of equipment, vehicles included with the purchase, estimated fair market value, depreciation schedule,

Inventory

List of current inventory, invoices with date purchased, condition and value.  

Sales & Marketing

Advertising lists, sales order statistics, pricing policies, product warranties and customer refunds.


There are many questions that should be asked when performing due diligence, such as Why is the business being sold? What role does the seller play in the management of the company? How can the business be improved upon? Which employees will stay after the sale? And the list goes on and on. A buyer needs to be diligent about his or her due diligence.


If you have any questions about selling your business, please contact Certified Business Broker Robert Dean for a Free Business Consultation. Banner Business Sales, Inc. Phone: 310-709-1985. Email: info@bannerbusinesssales.com Website: BannerBusinessSales.com

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