I An online marketplace that makes buying & selling a small business easy
If you are an entrepreneur thinking about either buying or selling a business, then this article will offer some great tips that can make the process a lot easier for you.
I It's a big decision that will have ramifications both for you and your family, so you want to make sure whatever you’re doing is for the right reasons. There can be a lot of emotion around the prospect of either exiting or buying a business – and you need to ensure that both “head” and not just “heart” are playing an equal part in any course of action you decide to take.
There are many decision points in the process – whether to use a broker for example, how to estimate the value of a business, what type of settlement period to negotiate, the size of any deposit that will be required, the extent of training that should accompany a sale, any arrangements that must be made for existing staff – and when and how customers should be advised about new owners.
One online global platform that connects potential business buyers with sellers is BusinessesForSale.com …… It is not the only online portal for buying and selling a business, however it is a very popular one and has tens of thousands of small and medium sized businesses listed. Whether you are wanting to buy or sell a cafe, a beauty salon, a garage, a franchise or maybe a graphic design or landscaping business for example – then it’s a marketplace option that you should consider.
I I recently posed some questions to Faye Ferris, the Marketing Director of BusinessesForSale
1. What are the potential benefits of buying an existing small business versus establishing one yourself?
There are many potential benefits of buying a business that’s already in operation instead of trying to set everything up yourself. Many of the initial decisions that can cripple some business owners have already been decided, such as name, location, logo, products, and services. Of course, as a new owner, you can choose to make changes, but you may not need to do that to actually start operating. Often taking over an existing business means you start your endeavour with staff, customers, suppliers, stock, and systems already in place, so the potential to start making profit is there from day one. By purchasing an operating business, you are eliminating one of your competitors, and with a financial record of the business, attaining loans and projecting income can be a much easier process which makes planning and expanding a lot easier.
2. What are some of the different formulas that are used to estimate the “fair value” of a business?
There are a lot of different ways for the valuation process to go, but they all have some common threads. If you are thinking of getting your business valued, you’ll need to know the history of the business and have thorough records/information on your employees, on the legal and commercial contracts and obligations you have, your business’ finances, as well as the market and industry as a whole. Once you have that information, here are a couple of formulas you could use:
· Comparable Business-Based Evaluation: With this method, it is difficult to get an exact amount, but it might be good for determining an approximate figure—which is helpful when assessing businesses to buy or when considering if you should sell.
· Discretionary Income-Based Valuation: This is basically taking and projecting what the owner’s income is and therefore what the future owner’s income could be, calculating return on investment.
· Multiplier Valuation by Sales: This method uses the industry multiple your business is in. It then multiples that amount by the business’ gross sales. For example, if gross sales are $80,000, and the multiple is 0.4—you’d have a valuation of $32,000.
Other formulas and more in-depth explanations can be found in this article, and it should be noted that things like goodwill are hard to attach a financial value to, so I suggest having a professional valuer or a business broker involved in the process. .
3. What are some of the risks and traps of buying an ongoing business?
While it may seem easier to buy an ongoing business rather than starting up from scratch, (and it usually is), you need to make sure you do your research. As well as taking on all the good of the business, it’s possible to also inherit the bad. If the business has a bad reputation with customers or suppliers, it could be difficult to turn that around. Conversely, the previous owners may have had a great relationship with suppliers/landlords, etc., and been getting a better deal than you will be offered as a new owner. There may be a temptation to not make any decisions or changes to a profitable business, but as each person’s leadership and management style is different, there will be inevitable changes/differences. The smart small business owner will be ready to change and adapt processes and systems to better suit the new management.
4. For those small business owners who are looking to exit their business and to sell either through a broker or an online platform, what advice would you offer?
Once you’ve decided that selling your business is the right move for you, the next step would be to decide if you should use a professional or not. Doing it yourself will obviously take more time, and you would need to familiarise yourself with your legal obligations and government requirements. The reason most people would choose to do it alone is financial, but you may be surprised and find that the cost of a professional broker isn’t as high as you’d think. The Australian government recommends AIBBbrokers, and I recommend this guide for helping you choose the individual broker that is right for you.
Whatever method you choose for selling your business, there are two pieces of advice that I would like to give: Take care of yourself and take care of your employees. A change like this is almost always at least a little bit unsettling and stressful for both the business owner and the employees. As the business owner, not only do you have to deal with all the legal and financial decisions while trying to get things in order, but also you have to say goodbye to something that has likely taken up a lot of your time and energy. For your employees, their routine and future have become more uncertain and unknown because they won’t know what changes are coming their way. Do what you can to go easy on yourself and others, communicate well, and try to make it a smooth management transfer in addition to a successful paperwork transfer.
5. Finally, tell us a bit about your online platform, BusinessesForSale.com – and why a small business owner or a budding entrepreneur should consider using your site …… and how they would go about it?
|Faye Ferris, Marketing Director|
When selling a business, I think you want it to have the best chance of getting in front of the highest number of potential buyers. For over 20 years, we have been helping business brokers and private sellers market their listings. From cafes to construction businesses, some of our most exciting business opportunities have included the makers of Big Ben's clock, a Chinese toll road, a crocodile farm in Thailand, and even a tropical island! We have become the world's largest marketplace, advertising 75,206 businesses for sale in over 130 countries with more than 1.5 million buyers visiting our site every month looking to buy a business. We also have guides and resources on the site to help you sell, buy, and run a business in Australia.
We rank on the first page of Google for thousands of search terms, so there's really no better place, in my opinion, to advertise when selling your business. The audience alone makes this an amazing platform. But there are also other great reasons to advertise with us, such as we do not earn a commission, and there are no hidden charges for you.
You simply choose a package and only pay the one-off fee; plus, you can cancel at any time without penalty. The process of listing is very quick and easy; you can add your business for sale in less than 10minutes. We'll email you each time a buyer is interested and store their details in your online account for easy access. When it comes to buying a business, I think you want to see the largest range of options available to you...so for all the reasons that make BusinessesForSale.com the best place to list your business, they also make it the best place to buy a business.
Thanks to Faye Ferris, for sharing some of her experience with us and offering some great practical tips on buying and selling a business. . Also, a related article that might be of interest is Dare To Be An Entrepreneur