Business Valuations 

For those business owners who are being contacted by firms all over the country about how they have a buyer for your business but first they need to do a business valuation, DON'T DO IT. They do not have a buyer and they are only interested in selling you a $10k to $30K business valuation. If in fact you are interested in a business valuation the most it should cost you is $5k.

For those of you who are curious as to what your business is worth here are some quick guidelines. Most businesses sell for 2-3 times cash flow. Ninety-five percent of all the businesses in the country do $1mil and less in sales. So, when I say most businesses sell for 2-3 times cash flow I am referring to businesses doing $1mil and less in sales. The larger the business the higher the cash flow multiplier but it normally tops out at 5 times cash flow.

Cash Flow is defined as: Profit on Tax Return + Interest on Debt + Depreciation + Amortization + Owner Compensation. If you would like a worksheet to help you determine your cash flow please contact me and I will email it to you, for free.

Bank Financing Today (Sept 08)

We are not experiencing that much more difficulty getting bank financing today than in the past. One major difference is that if you use equity in your home for a downpayment you must have a different source of income other than the cash flow from the business to pay back that debt. However, as in the past the responsible banks are willing to finance buyers with the proper downpayment, good credit and business skills and businesses that can demonstate on the tax return sufficient cash flow to pay back the debt and support a family.

Seminars

We are starting our seminar series back up this fall. The seminar is called How to Buy Sell and Value A Business and we will have it the second Wednesday of each month from 12 noon to 1pm at the office in Blue Ash. It is a great opportunity to learn both sides of the story and learn how businesses are valued.

Cash Needed to Buy a Business   

A quick rule of thumb to figure out how much cash you need to buy a business is: you need in cash what you want to make in a year. So, if you want to make 100k in a year you will need 100k in cash. Cash means cash, your cash. Not money from the equity in your home, not money you will borrow from "investors" or friends or family, not money from the seller. The cash could come from your checking or savings, stocks or bonds and even your 401k when you quit your job. You can use the equity in your home only if you have another source of income other than the business you are buying to pay back that loan. Contact me if you have any questions.

Selling a Business Environment (Dec 08)

Believe it or not it is actually a sellers market. How can this be. It is because there are a lot of buyers out there. Who are these buyers? People who are losing their jobs who can't get another one but still need to find a way to support their family. Some our getting severance packages and others have been saving all along and are ready to use that money to take control of their lives. The responsible banks are still financing deals. It is becoming a little more difficult to find businesses that have increasing sales in this environment but there are still a number of busineses cash flowing enough to support a family. So, if you are a business owner and you really don't want to run your business anymore but are afraid today is not a good time to try and sell, you might be suprised. Give us a call to discuss.

Jan - March, Busy Time of Year

January through March is a good time to have your business on the market because that is when a lot of buyers are looking. Most business buyers are people recently unemployed looking for a way to support their family. A lot of people lose their jobs at the end of the year or January. 2008/2009 might see the highest unemployment rate in many years. Your business might be down from years past but from a buyer's perspective at least you have positive cash flow and enough to support a family. Contact me if you have any questions.