EBITDA is an acronym for Earnings Before Interest, Taxes, Depreciation, and Amortization. The EBITDA Appraisal Method attempts to remove all the factors that are viable from one owner to the next in privately held businesses. That said, the EBITDA Appraisal Method is most often used for public companies where their enterprise value can be computed. […]
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The Rule of Thumb Appraisal Method is a method often used to compute the approximate value of closely held small businesses. This method relies on a multiple of some unit of measure. The unit of measure changes based on the type of business or industry. It may be the number of subscribers, gross annual commissions,
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Business Buyers Come in Two Flavors. Financial Buyers and Strategic Buyers. Each Type of Buyer Values a Business Differently.
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When it comes to buying a business, buyers buy a documented and believable future. If you are the seller, it is your job to explain the past and sell the future. While it is up to the seller to prove the value of the business, it is often not a good idea for the seller
In M&A, He Who Mentions Price First Loses Read More »
The inverse to why sellers sell a business is why buyers buy. Often a seller may only sell one business in a lifetime. However, buyers often buy several companies during their lifetime as they assemble pieces to help another business grow. Many buyers purchase a business to avoid the risk associated with start-ups and are
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I teach a boot camp class each month for our local Small Business Development Center (SBDC). There is portion of this course that looks at the three ways to become a business owner. These ways include: buying a business, buying a franchise, and starting from scratch. As I discuss the option of buying an existing
Why Owners Sell Their Business Read More »
When the seller makes the decision to sell his business, time is often his worst enemy. Many things outside of the seller’s control can often negatively effect the value of the business. For example, changes in the industry can make elements of the business obsolete. The interest rate hikes by lenders can make your business
Business Cycle Economics and Selling a Business Read More »
There are many reasons to conduct a business valuation. Some valuations are pretty straightforward while others can be quite complicated. If there is a good possibility that the valuation will be challenged on legal grounds or by the IRS, it is often best to have the valuation performed by a qualified appraiser. That said, I
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When it is time for an owner to sell his business, the wise seller will “recast” his financial reports to create a clearer and often better impression of his business for the buyer to see. If you are the buyer and the seller has not done a recasting of their financial statements, you’ll want to
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Most banks say that they are small business lenders. The missing part of that statement is how banks define small businesses and what banks will lend money for. From the bank’s perspective, a small business is an established business and not a new business. Banks lend money primarily for tangible assets that double as collateral.
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