M&A SERVICES FOR SUCCESSFUL BUSINESS SALE
Business Sale With The Aid of a M&A Services
Business buyers have three avenues to consider for business ownership: starting their own business, buying a franchise, or buying an existing business. Of the three, starting their own business is the riskiest proposition – a person will need ample capital, a well-thought-out business plan, and a marketable concept. Taking risks can be both fun and fruitful. Too often however, it can be fatal. Statistics have proven that up to 80% of new business start-ups fail within the first five years of operation.
Buying a franchise can provide the thrill of a start-up business but with the risk significantly reduced. The value of the franchise is the brand name, tested and proven marketing and operating systems, and the support and training offered by the franchiser. Realize however, that any business start-up can take up to two years to yield a profit. Buying an existing business can allow the buyer to benefit from the organization put together by the previous owner, yet be creative in growing the business to reflect his personality and take advantage of new opportunities. When a person buys a business, they are not just “buying a job,” they are buying a lifestyle, the chance to build your future, and the opportunity to leave their kids something of real value.
Business sellers should utilize a M&A Services company to prepare to answer the following buyer questions and due diligence:
Conducting Due Diligence
Prior to placing a business for sale, your due diligence on a business acquisition should be conducted by a M&A Services Company. The due diligence needs to be done with care, it should include a review and audit of information pertaining to the business. Obtaining M&A Services to help in the sale of a business, is highly recommended.
Banks are leery of financing business purchases, especially for borrowers with little or no direct operating experience with the business in question. Most businesses have few hard assets that could be sold to repay the loan in the event of default. Their “worth” is in their continuous, profitable operation. The last thing the bank wants is to have to operate your business successfully in order to secure repayment. Banks are in the business of lending money – not operating small enterprises. Small Business Administration (SBA) backed loans are often available to fund start-ups and business acquisitions. However, SBA loans can be difficult to obtain due to financial, operational and collateral issues. Business acquisition loans are easier to obtain if they are combined with seller financing or earn outs. Seller financing and earn-outs are common in the sale and acquisition of a business. The structure of the financing can be designed as a traditional loan with normal repayment schedules or an earn-out with payments based upon a percentage of future revenues. Seller financing or earn-outs will provide you with some comfort that the seller now has a vested interest in your on-going success with the business.
Passing Knowledge to a Business Buyer
When a buyer buys an existing business to benefit from its income stream and the relationships that are already in place with employees, vendors, and customers. Buyers also buy into a business to benefit from the experience of the seller. All too often, the operating knowledge gained by the owner is not documented and there are few written policies or procedures. As an essential element of your business acquisition, be sure to negotiate for the seller to remain with the business for a certain period of time to benefit from the operating experience the seller has gained. Like many business owners, buyers will find the experience from the previous owner to be very helpful and beneficial!
For more information on m&a services contact American Fortune Mergers & Acquisitions at (800) 248-0615