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[Q.] - I've been looking for a business for
over 6 months - and really haven't found much. How long does it take to find a business? - Ron D., Chicago, IL (Buyer)
[A,]
- Of the six broad steps involved in buying a business - finding the company is by far the most difficult. I always tell buyers
to be prepared to wait up to a year, and sometimes longer, but also be prepared to move quickly when you find your business
- because there are a lot of buyers out there. Buyers far outnumber the sellers - and you need to be patient.
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[Q.]
- I recently heard that less than 20% of the businesses put up for sale actually sell. Is this correct? - Tom A., Appleton,
WI (Seller)
[A.] - I think it probably is correct. However - virtually any business can be sold if - the buyer
is profiled correctly, it's exposed to enough of the right kind of buyers, given adequate time and structured properly.
Buyers
come in all shapes and sizes. The individual buyer is usually "buying a job." They're looking for a business that will provide
them with a living wage and enough money to pay back any loans taken to purchase the business.
Investors are interested
in return on investment and will sometimes forgo immediate returns for future returns and growth. They'll often infuse additional
capital, knowledge and contacts.
A strategic buyer is usually another company interested in increasing customers, products,
territory, combining operations to lower costs or some other strategic fit. The company may be in a similar or complementary
type business or it may want to expand into the sellers type business.
By recognizing and finding the "best fit" -
almost any business can be sold.
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[Q.] - I own
a small business and have been trying to get a handle on what it's worth. A friend of mine heard a business should be worth
about 5 times sales. Does this sound about right? Mark M., Milwaukee, WI (Seller)
[A.] - Sellers always like
to value their business based on their sales or even on their potential sales. The problem arises because someone reads an
article that states that a certain type of business was sold for 5 times cash flow - and the reader confuses cash flow with
sales.
If the financial statements are analyzed line by line, adjusted and restated - showing the actual earning power
of the business - you can arrive at a realistic cash flow figure. Comparing that cash flow figure with the cash flow figure
of what similar type business have recently sold for - will give you some meaningful guidance.
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[Q.]
- Yesterday I talked to someone who said they talked to you about selling their business and that you declined. Could this
have happened? Emily S., Oshkosh, WI (Seller)
[A.] - It happens. Since I don't know who you're talking about
I don't know the details. If we don't feel a seller is realistic - we won't get involved. After almost 30 years of selling
businesses - we don't need the practice anymore. We have plenty of buyers so we don't need "swing listings." ( A listing that
looks good in an ad, attracts buyers to swing to other listings.) We try to spend most of our time and energy finding the
"Best Fit" for our client's businesses and to complete the job.
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[Q.]
- We've been watching your website for almost two years now and I've seen a wide variety and price range of businesses. What
types of businesses do you sell? Bill & Sue S. Kenosha, WI (Buyers)
[A.] - When we started selling business
in the 70's most of the businesses we handled were small mom and pop types. (Restaurants, Retail Stores, Small Print Shops,
Small Auto Repair Shops, etc. etc. etc.)
We never turn down a former client or customer - no matter how small the business.
We also get many, many requests for smaller type businesses.
Today we focus on the larger businesses - Manufacturing,
Distribution and Service type Companies - but we'll help any serious buyer or seller.
We are currently working with
companies in a price range from about $95 thousand to $15 million.
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