Frequent Questions

QUESTIONS & ANSWERS

Why is Confidentiality important?

If employees find out, they can get nervous about their future employment and seek other employment before the business is sold. If competitors find out, they may try to take advantage to lure customers away before the business is sold. If customers find out, they may seek other competitors fearing that the current business owner will begin to neglect the business.

What is the true value of a Business?

There is no absolute value, but there is a “range” of value which would include the tangible and intangible values of the business. There are no magic rules of thumb that will determine a fair market value, however there are methods of determining value and in most cases a number of methods can be averaged to determine a value. The final value is what a willing purchaser will pay and what a willing seller will accept. Fair full information negotiations will help determine the price, terms and conditions.

Why buy a business rather than start one?

The failure rate is very high on start-up businesses, primarily due to poor planning and inadequate capitalization. An existing business has a track record and has demonstrated the need for the product or service in a particular location. Training is available from the seller and help is given in the transition process to make the new ownership smooth and acceptable to the current customer base.

How are most businesses priced?

It depends on the broker who represents the Seller, if the broker is experienced and knowledgeable in valuing a business - that broker will do an analysis and advise the selling value. Some brokers will just take the price that the seller wants and try to sell it at that price. A price has to be meet the test of a hypothetical terms of sale if it is to be financially valid.

What are the basic steps in considering the purchase of an existing business?

See “10 Steps in Purchasing a Business”.

What can I expect when I start telling people that I am considering purchasing a business?

See “Beware the Deal Killers”