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Buying Or Selling A Business Is Unlike Anything Else
| Guest post by: Andrew Rogerson |
Article Overview: This article summarizes the benefits and values of buying or selling a business. It covers valuations, advertising and negotiations. All of these steps are key features when one is thinking of selling their business or becoming a buyer of a business.
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Free Download - How to sell a business By Andrew Rogerson |
Buying Or Selling A Business Is Unlike Anything Else
Not everyone will agree but I am sure it’s
closer to the truth than one might think: buying or selling a business is
unlike anything else of value. To
support my argument there are a number of reasons. Let’s look at some of them.
The price of a business is determined by a
valuation. The rules of a valuation come
from the law and then legal cases as well as the Internal Revenue Code and
custom. The price for most other items
of value are determined by market comparables (for example, when valuing a
house), looking up a book or some online site such as Kelly Blue Book (for cars)
or results from eBay or some other online service (for any item you can think
of). That is, there is no legal
interference with the value of any these items except a business.
When advertising to find a buyer of these
items, with the exception of a business there are no rules. To be clearer, when selling any other item
the owner wants the world to know it’s for sale. Regular and established advertising channels
are used including online web sites, newspaper or magazine advertising, family,
friends and anything else to find a buyer.
Conversely, with a business, advertising is done using less familiar
methods and in most cases, the advertising is obscure so family, friends,
customers, employees, suppliers, landlords, lenders and others are not aware
the business is for sale.
When a buyer and a seller enter into negotiations
for anything except the business, it’s generally very simplistic and does not
need the involvement of third parties.
In contrast, negotiating a business often involves complex negotiations
with sophisticated parties. These
parties can include lenders, landlords, attorneys, accountants, business
intermediaries or business brokers as well as hidden support for buyers and
sellers such as family and friends.
When selling a business, to get the maximum
price possible, normally involves a lot of work for an extended period of
time. The steps the seller takes
includes trying to increase revenue, recasting the financial statements to
arrive at an accurate and supportable discretionary earnings of the business
and repairs and upgrades to make sure the business looks the best. Items being sold other than a business can
similarly be polished but there is a limit on what can be done and the amount
of time to do it.
When the buyer and seller reach an
agreeable point in the negotiations of a business transaction, all items must
be converted to paper. One of the first
items it defines is whether the business is being sold as an asset or stock
sale with this single decision has many tax and legal implications. Additionally, this one decision in itself,
can set off a series of negotiations or at least, in-depth discussion and
analysis by both parties.
In some business transactions, the
negotiations can trigger a set of different valuations to support each parties
position and whether or not the transaction ultimately closes. For example, if the purchase includes real
estate or a large number of physical assets or intangibles such as trademarks
or copyrights or the business itself then there could be four valuations. The first is a valuation of the commercial
property, the second is a machinery and equipment appraisal, the third is an
intellectual property appraisal and the fourth a business valuation.
Buying and selling a business is
unquestionably complex. The complexity
can include the business and its different assets but added to this is the
complexity of the emotions each party brings to the transaction plus the fact
that it can sometimes take many months to finalize the matter adding an
additional layer of complexity due to life situations happening such as health,
legal, family, finance and many other items affecting the process. For a willing buyer and willing seller to
eventually close the transaction, it will require patience and clear
communication and normally, the help of a good business broker.
Andrew
Rogerson is a 5 time business owner who currently specializes in helping
entrepreneurs enter or exit owning and operating their own business. He’s also the author of four books on
business ownership. For more
information, visit Andrew’s website by searching for him in googleand order a copy of any of his books including Successfully Buy Your Business:
Expert Advice from a Business Broker or Successfully Sell Your Business: Expert
Advice from a Business Broker. Andrew
Rogerson is a Sacramento Business Broker.
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About the Author: Andrew Rogerson RSS for Andrew's articles - Visit Andrew's website Andrew Rogerson is a 5-time business owner that loves helping entrepreneurs sell or buy a business. Andrew currently holds the Certified Business Intermediary (CBI) designation from the International Business Brokers Association (IBBA), the highest designation awarded by the IBBA. Andrew has also earned the Certified Business Broker (CBB) designation from the California Association of Business Brokers (CABB.) He holds a Certified Machinery and Equipment designation (CMEA) from the NEBB Institute and is a Certified Senior Business Analyst (CSBA) with the Society of Business Analysts. Andrew is a member of the Sacramento Metro Chamber of Commerce and past Chair of the Sacramento Chapter of the California Association of Business Brokers. Andrew is also the author on a series of four books: Successfully Sell Your Business, Successfully Buy Your Business, Successfully Buy Your Franchise and Successfully Start Your Business. For more information go to http://www.businesstransactionbooks.com Click here to visit Andrew's website   Successfully buy a business |
Related Forum Posts
Blog pinging
- Thanks Martin - yes, I do ping and it has been very effective. I'm currently on the first page of Google for Mastermind Group and on the second page for Selling to Small Business.
My entry
- 1. The Best Business Books Ever: The 100 Most Influential Business Books You'll Never Have Time to Read
- this is a fascinating book about the history of Business theory, and I'd recommend it to anybody.
2. The Big Book of Small Business: You Don't Have to Run Your Business by the Seat of Your Pants, by Tom Gegax. Ditto.
3. PADI: The Business of Diving Book
Okay, so this book won't be of use to anyone who doesn't want to start a scuba store, but I did, and this book was of course invaluable to me in reaching that goal.
Why Yahoo Ad difficult
- I guess that's the primary reason of yahoo why is very hard to get an account in their yahoo ads, to target more US users. Unlike in google, it's very easy to sign up in adsense and is available anywhere.
Exclusive: Interview with Results
- Hi Forum Members,
I'm helping start up a Business Coaching and Consulting company here in Toronto, Ontario, Canada (a Subsidiary of RSC Business in Los Angeles).
As a Research and Development Intern I am required to practice my listening and interview skills by surveying Small and Medium Businesses on thier Business.
This Survey is designed by RSC Business to also assist the Business being interviewed more insight into their own business.
I am looking to interview about 30 businesses across North America over the span of 3 months.
At the end of these interviews I will be publishing a report of the results and they will be made available for free to the Interviewees. The Report data will include responses from a minimum of 100 interviews.
I would like to extend this opportunity to members of the Forum.
If you would like to have this short 20-30 minute interview conducted on your Business and you reside in North America please send me an email or PM.
Please contact me at andy[at]jvprosperity[dot]com to arrange our interview and to get free access to the results when they are published.
Re: Kevin's Case Study #10 - When to become an entrepreneur?
- When the bug bite you. A lot of successful entrepreneurs started in their teens or at school. Selling sweets to fellow students or lemonade to firends in the neighbourhood.
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