Qualifying Buyers of Small Businesses

When you are selling small businesses as part of your real estate career, there is a need to have a checklist approach to qualifying all the buyers that you come across. In only this way can you refine the needs to match the listings that you may have.

The cycle of buy and sell in small business is about 5 years on average. This means that many small business proprietors will buy a business and turn it around to a better business for resale in about 5 years. This cycle is good for finding new business listings for sale.

These are some of the key questions that you could use in the qualification process with potential buyers of small businesses. You want to narrow the field so that only the relevant listings will be shown to the buyer. Sample questions are:-

• Do you need a business that employs over 25 people? This is not a small business but rather is of the medium business level and will have more complex cash flow needs.

• Is the business going to be run by management staff or by you as proprietor?

• Are you looking for a business that is located in a specific niche market? Does that niche market have a seasonal sales and production cycle that will be relevant to the purchase decision?

• What are the levels of sales turnover that you see appropriate for the ideal business?

• Do you want a business that is rundown and yet have the potential for turnaround?

• What special skills do you have that will be relevant to the purchase of a new business?

• What is the appropriate involvement of the proprietor in running the business?

• What is the value of the business that you have in mind?

• What is the market spread of the business that you have in mind?

• Have you sufficient cash reserves to make the purchase of a new business and to what level?

• How do you see the business operating in the absence of the owner?

• Are you looking for a business that is successful but small, or are you looking for a business that is small with the potential to expand?

• What is the ideal timing of the business purchase and in what location?

Next you need to consider the tangible assets that they feel they need in the purchase of a new business. It will dictate the price range you are to work in. Some purchasers prefer businesses where tangible assets represent a large component of the purchase price, and a smaller goodwill component. They are attracted to lower perceived risk where the price is supported by these tangible or physical assets.

A small business can have a variety of tangible assets, all of which will impact the price, the timing, and the method of sale. You will need a qualified valuer to assess the final value and impact of the tangible assets.

Depreciation and deterioration of the tangible assets may also be a consideration in the business sale. Quantity surveyors may be needed to help with the assessment of that aspect of the business.

Tangible assets are for example:

Land and Property
Motor vehicles
Plant and equipment etc

Highly profitable businesses that do not require extensive tangible assets to generate their profit are usually more efficient in the long term and have higher growth capacity. They do not have significant capital expenditure and therefore have lower ongoing capital replacement requirement. These businesses are very popular with business buyers.

Get all the right details understood first so that the correct businesses are located for the buyer.

John Highman is an expert in investment real estate strategy and performance. He is a keynote speaker and coach that helps property investors, and real estate agents globally to improve their commercial real estate property opportunities and targets.

Why Business Owners Need to Know The Value of Their Business Today

This article will discuss the fundamentals of business valuations and why you need one. Valuations are usually triggered by the following common events:

1) Transaction Support (for buyers and sellers)
2) Buy-Sell agreements
3) Divorce
4) SBA Financing
5) Employee Stock Ownership Plan (initial, recurring)
6) Assessment of Damages
7) Estate and Gift Tax
7) Bankruptcy and Reorganizations
7) FAS 157 Fair Value Reporting
8) Other

Business owners often overlook a valuation as a strategic tool to maximize the value for their business. The time to get a valuation is not immediately prior to a sale, but on the first day of ownership. When a business owner considers valuation in the management of a business, the business will likely be more valuable and sell faster when the time comes. Some businesses will take several months or even years to maximize value.

The value of your business is determined by what a buyer will pay. Different types of buyers will pay different amounts for a business. An industry insider will pay little or nothing for goodwill. The industry insider will pay book value or liquidation value which tends to be a lower price than what a financial buyer would pay. A financial buyer generally buys a Main Street business with a sales price of less than $2,000,000. These types of buyers will be concerned with discretionary earnings, cost to replace and debt capacity. Buyers seeking businesses above a sales price of $2,000,000 are considered corporate buyers that will rely on more sophisticated valuation techniques. They will employ excess earnings, discounted earnings, capitalization of earnings and multiples of earnings before interest and taxes (EBIT).

Valuations are mathematical calculations that arrive at a price, but the challenge is in the details. Figuring out what assets and liabilities to include in the valuation, choosing a standard of measuring their value, and then actually determining what each asset and liability is worth. For example, many business balance sheets may not include the most important business assets such as internally developed products and proprietary ways of doing business. If the business owner didn’t pay for them, they don’t get recorded on the balance sheet. Businesses without its special products or services that make it unique become a less valuable opportunity for a buyer. Business owners must be aware of this fact and structure the business to make it easy for buyers to see the true value of the business.

As you work tirelessly to meet the everyday challenges of running your own business, you may feel like you’re wasting your time reading an article on valuing your business. You’re not; if you fail to structure your business for maximum value, you will surely sell your business for less money. You may not even be able to sell your business if the value isn’t apparent to picky buyers. The U.S. Department of Commerce estimates that 3.6 million businesses are offered for sale every year, but only 250,000 are sold. Don’t be the 90% of business owners that never sell their business. Know what your business is worth and start increasing its value today.

Best Business Laptops For Your Business Needs

The ultimate business laptop is perfect to carry around and be unnoticed, can be used to compile quick business reports and spreadsheets, and pretty much anything that goes with a business meeting should be integrated into one of these computing machines.

It goes without saying that a business laptop should be highly connectible so you never miss an important email or can attend a web conference without physically being there. It should also allow you to access certain features which keep your business up and running, so if your business is an online business, then you will probably be accessing the social media places such as Twitter, Facebook (if you have that kind of page for your business) and many others. You will be communicating with your business partners, and since it’s better to actually see who you’re talking to, a nice built in webcam should do the trick just fine.

It is important you know what makes a laptop good for business and what makes a laptop a standard consumer laptop used for everyday online activities.

That being said, let’s go through some features a business laptop should have:

Laptop size:

The size of the laptop is pretty important. It goes without saying that a small laptop, a 10 inch mini computing machine probably won’t be capable of storing much, or actually making huge calculations some software demands. Or perform pretty well when it comes to installed software. A decent size for your business laptop should be one that suits your business. If there’s a lot of data to be carried around, a decent sized laptop would probably be used to create presentations and spreadsheets. These are two things that business laptops should be able to handle. A visual representation of data is always more handy than just numbers, so make sure your portable computer can handle such tasks.

The standard size is the probably one you should go with. A 15.4 inch screen laptop is perfect if you don’t know yet what you will be using the laptop for. Also, go with a laptop configuration that is a bit above the average, to make sure it can handle itself with all the types of software it can encounter.

Power – It always boils down to power

Processing power I one important aspect of any laptop, not just business laptops. Some new models carry quite the powerhouse with them, having quad-cores and whatnot. These can get a bit expensive, but if it helps your business and increase overall productivity, then you should go for it. Just remember that a big processor on your laptop will mean a big power requirement. High end CPUs tend to empty a battery much quicker than regular ones. It’s the price you pay for high performance.

Portability – The laptop goes where the business takes you

A business laptop should be very portable so you can take it everywhere with you and don’t perceive it as a brick you have to carry around. If the business requires only a few simple computing tasks, then the best business laptops should be the ones that are small and still carry enough processing power to handle easy tasks. Think of small sized 10 inch screen diagonal laptops which you can fit into your briefcase along with other documents you might be carrying around with you. These are not powerhouses, but they simplify the whole way you do business and can store up on a lot of information.

Connectivity – Business on the go

You want to make sure that your business laptop is highly connectible since you’ll be carrying it a lot with you and you need to stay in touch with business partners or possible clients. Make sure it comes with Wi-Fi connectivity, or search for the ones that can use the mobile phone networks to access the internet. At the office you can probably use the wired connection, or, if your office is equipped with a wireless router, you can still take the laptop with you around the office and keep connected.

Laptop Looks

Get a feel for the business laptop you will be using. If it’s a business laptop, then it should go nice with a suit. It should be a standard black model and should not carry any colorful distinctive marks to attract attention to it. The laptop you carry around represents the way you do business. If you would carry a pink laptop around with you, how would that impact your business credibility? This is more of an appearance feature rather than a performance one. Choose the laptop that goes with what you do, not a laptop that’s in total contrast with your business ethic.

Laptop graphics capacity

When choosing the laptop for your business, you won’t need to look at its graphics card. High-end graphics cards are great for gaming laptops, but if its business you are doing, it’s simply not a necessity since you won’t be fooling around playing games all day long.

The best laptop for business will carry a built-in graphics card which will probably be using some of the available system RAM to run properly. Make sure your laptop is stocked up on RAM before making the choice.