[et_pb_section fb_built=”1″ _builder_version=”4.2.2″ background_image=”https:\/\/cagflorida.com\/wp-content\/uploads\/1.jpg”][et_pb_row _builder_version=”3.26.3″][et_pb_column type=”4_4″ _builder_version=”3.26.3″][et_pb_post_title meta=”off” featured_image=”off” _builder_version=”4.2.2″ title_font=”|600||||on|||” title_text_align=”left” title_text_color=”#ffffff” title_font_size=”32px” title_letter_spacing=”1px” title_text_shadow_style=”preset1″][\/et_pb_post_title][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”3.26.3″ custom_padding=”5px||0px|||”][et_pb_row _builder_version=”3.26.3″ width=”100%” module_alignment=”left”][et_pb_column type=”4_4″ _builder_version=”3.26.3″][et_pb_ds_breadcrumbs _builder_version=”3.26.3″][\/et_pb_ds_breadcrumbs][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”3.22″ custom_padding=”0px|||||”][et_pb_row _builder_version=”4.2.2″][et_pb_column type=”4_4″ _builder_version=”4.2.2″][et_pb_accordion _builder_version=”4.2.2″ hover_enabled=”0″ closed_toggle_background_color=”#f8f8f8″ icon_color=”#246e30″ use_icon_font_size=”on” icon_font_size=”20px” open_toggle_text_color=”#000000″ toggle_text_color=”#000000″ toggle_font_size=”18px” closed_toggle_text_color=”#000000″ body_text_color=”#000000″][et_pb_accordion_item title=”How do I know what my business is worth? ” open=”on” _builder_version=”4.2.2″]<\/p>\n
In all likelihood when an owner first thinks of selling a business, they immediately think \u201cI wonder what it is worth?\u201d\u00a0 A prudent person develops a realistic and informed view of value before setting out to sell their business.\u00a0 Appropriate or accepted valuation methodologies vary depending on the nature of the business and its industry.\u00a0 However, there are generally three approaches to value.\u00a0 These are capitalized earnings, discounted cash flows, and multiples of earnings.<\/p>\n
[\/et_pb_accordion_item][et_pb_accordion_item title=”Who will buy my company? ” _builder_version=”4.2.2″ open=”off”]<\/p>\n
Buyers generally fall into one of three categories. These are:\u00a0<\/p>\n
[\/et_pb_accordion_item][et_pb_accordion_item title=”What is a mergers and acquisitions (M&A) advisor? ” _builder_version=”4.2.2″ open=”off”]<\/p>\n
M&A advisors, also referred to as M&A intermediaries or business intermediaries, try to match businesses for sale with possible buyers.\u00a0 M&A advisors typically deal with \u201clower middle market\u201d or \u201cmiddle market\u201d companies.\u00a0 Although there are no hard and fast definitions, we think of lower middle market companies as those having $5,000,0000 to $75,000,000 of annual revenue and middle-market companies having annual revenues between $75,000,000 and $500,000,000. Transactions involving these companies are often more complex than those involving Main Street companies. A more sophisticated approach to marketing, valuation, and transaction structuring may be required for a lower middle market or middle-market transaction.<\/p>\n
[\/et_pb_accordion_item][et_pb_accordion_item title=”What are M&A advisory services? ” _builder_version=”4.2.2″ open=”off”]<\/p>\n
M&A advisors provide a variety of services to buyers and sellers. These services can include:<\/p>\n
[\/et_pb_accordion_item][et_pb_accordion_item title=”What is a business broker?” _builder_version=”4.2.2″ open=”off”]<\/p>\n
A basic definition of a business broker is an individual that helps people buy and sell Main Street businesses, those with revenues less than $5,000,000. The majority of Main Street businesses have annual revenues of less than $1,000,000.\u00a0 Business brokers are often compared to real estate agents. In nineteen states, business brokers are required to have a real estate license.\u00a0 Florida is one of these states.\u00a0 Just as real estate agents estimate the value of a property to help establish a listing price; business brokers estimate the value of a business to establish a listing price. Real estate agents advertise properties on MLS (multiple listing service) or in print media; business brokers advertise companies and business opportunities online or in print media.\u00a0 Further, both usually work for a commission.<\/p>\n
[\/et_pb_accordion_item][et_pb_accordion_item title=”What are mergers and acquisitions? ” _builder_version=”4.2.2″ open=”off”]<\/p>\n
A merger is the combining of two companies into a new company.\u00a0 The owners of the combining companies receive stock in the new company.\u00a0 An acquisition is the purchase of one company by another.\u00a0 A new company is not formed.\u00a0 The owners of the purchased company may or may not receive stock in the acquiring company as part of the sales price.<\/p>\n
[\/et_pb_accordion_item][et_pb_accordion_item title=”How will I get paid for my company? ” _builder_version=”4.2.2″ open=”off”]<\/p>\n
What you receive for your company is called \u201cconsideration\u201d. Consideration can be anything to which you ascribe value.\u00a0 Although most people would like to receive 100% of their consideration in cash at closing, it often doesn\u2019t happen.\u00a0 Rather, sellers are often paid with a combination of some or all of the following: cash, notes, buyer\u2019s stock, earn outs, and consulting agreements. There are legitimate reasons for each of these, and some combination of some or all of them can often satisfy both buyers and sellers.\u00a0<\/p>\n
[\/et_pb_accordion_item][et_pb_accordion_item title=”Why should I agree to accept anything other than cash for my business? ” _builder_version=”4.2.2″ open=”off”]<\/p>\n
The reality is that unless your buyer is named Amazon, Google, or Apple they probably won\u2019t have sufficient cash to simply write a check. Even if they do, it might not be prudent to do so because, for example, doing so might strain working capital resources needed to meet day to day business needs.<\/p>\n
[\/et_pb_accordion_item][et_pb_accordion_item title=”Why would I agree to accept notes payable from the buyer as part of my consideration? ” _builder_version=”4.2.2″ open=”off”]<\/p>\n
There are several reasons you might agree to accept notes from your buyer.\u00a0 Depending on how the notes are structured, you might qualify for installment sale treatment and defer payment of some taxes.\u00a0 The notes can also pay you interest at regularly scheduled intervals.\u00a0 Accepting notes might allow your buyer to avoid bank financing.\u00a0 Sometimes involving a bank complicates a transaction because of the bank\u2019s own requirements.\u00a0 Further, agreeing to accept notes may provide an opportunity to negotiate a higher sales price.\u00a0 Regardless, if you accept notes, try to have them collateralized or guaranteed.<\/p>\n
[\/et_pb_accordion_item][et_pb_accordion_item title=”Why would I accept the buyer\u2019s stock as payment? ” _builder_version=”4.2.2″ open=”off”]<\/p>\n
If you receive stock in the buyer in as payment for your company, you won\u2019t owe tax on the stock received until it is sold. Before agreeing to accept stock, you should consider whether the buyer is a publicly-traded company or a privately held company.\u00a0 Stock in a public company liquid, it can be easily converted to cash.\u00a0 Stock in private companies is usually far less liquid or even illiquid.\u00a0 It is not easy to convert to cash. Therefore, if you accept private stock as consideration require a put option. A put option allows you to require the buyer to redeem your stock at a defined price at some point in the future.\u00a0 This is called exercising the option. Your risk is whether the buyer will be able to meet the obligation when you exercise the option.\u00a0 You may also agree to accept stock if you believe the buyer will thrive and succeed in the future and you want to participate in the success.<\/p>\n
[\/et_pb_accordion_item][et_pb_accordion_item title=”What\u2019s an earnout? ” _builder_version=”4.2.2″ open=”off”]<\/p>\n
An earnout is a mechanism that makes additional or future payments dependent on the buyer achieving defined goals in the future. Earnouts are often used to bridge gaps between buyer\u2019s and seller\u2019s opinions of value. An earnout might also motivate a seller to continue working in the business post-sale to help in the transition period. For example, if the business makes at least $5,000,000 of net income in the next fiscal year, you receive 20% of the net income.\u00a0 If the business makes less than $5,000,000 you do not earn 20% of net income. This is a very simplistic illustration.\u00a0 You should consult with your advisors before accepting an earnout as part of your deal.<\/p>\n
[\/et_pb_accordion_item][et_pb_accordion_item title=”What is a consulting agreement?” _builder_version=”4.2.2″ open=”off”]<\/p>\n
Consulting agreements are another way of receiving consideration over time. The buyer will pay you a fee in exchange for consulting on matters related to the business.\u00a0 The fee is typically paid on a regular basis, i.e. monthly or quarterly, for a pre-determined period of time.<\/p>\n
[\/et_pb_accordion_item][et_pb_accordion_item title=”What is EBITDA? ” _builder_version=”4.2.2″ open=”off”]<\/p>\n
EBITDA is a very common acronym in corporate finance. It stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. EBITDA is a measure of the cash generated from the company\u2019s core business; it is an illustration of a company\u2019s ability to generate cash flow for its owners. EBITDA = Net Income \u2013 Interest Income + Interest Expense + Taxes + Depreciation + Amortization.<\/p>\n
[\/et_pb_accordion_item][et_pb_accordion_item title=”What is \u201cadjusted\u201d EBITDA? ” _builder_version=”4.2.2″ open=”off”]<\/p>\n
Adjusted EBITDA is often referred to as normalized EBITDA. It is EBITDA adjusted for unusual or nonrecurring expenses that are included in the income statement. Examples of expenses that should be added back to EBITDA to arrive at adjusted EBITDA include the one time cost of settling a lawsuit, costs related to operating facilities that will not be incurred post-acquisition, excessive owner compensation, and owner\u2019s personal expenses that are buried in the income statement.\u00a0 Examples of the latter include country club dues, automobile expenses, and premiums for key man life insurance.<\/p>\n
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[\/et_pb_accordion_item][et_pb_accordion_item title=”What does it cost to sell my business? ” _builder_version=”4.2.2″ open=”off”]<\/p>\n
M&A advisors and brokers typically earn all or most of their compensation through success fees. If they succeed in finding a buyer and closing a sale, they earn a percentage of the sales price.\u00a0 The success fee can range from 3% to 10% and is dependent on a number of things.\u00a0\u00a0 While this may sound like quite a spread, it is important to understand that it can easily take the same effort to sell a $5,000,000 company as it takes to sell a $30,000,000 company.\u00a0 The ability of your staff to meaningfully contribute to preparing and presenting due diligence materials, assembling deal books, and responding to prospective buyers\u2019 questions impacts the fee.\u00a0 A distressed business or a company in a declining or out of favor industry may demand a higher fee than a highly profitable business in a hot industry.\u00a0 In addition to success fees, you might also pay a retainer.\u00a0 The retainer may be paid upfront or monthly.\u00a0 Depending on the assignment, the broker may agree to apply the retainer to any commission earned.\u00a0<\/p>\n
In addition to fees and commissions, other costs may be incurred.\u00a0 These include attorney\u2019s and accountant\u2019s fees, plus the cost of appraisals, environmental testing, and IT exams.<\/p>\n
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In all likelihood when an owner first thinks of selling a business, they immediately think \u201cI wonder what it is worth?\u201d\u00a0 A prudent person develops a realistic and informed view of value before setting out to sell their business.\u00a0 Appropriate or accepted valuation methodologies vary depending on the nature of the business and its industry.\u00a0 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":""},"_links":{"self":[{"href":"https:\/\/cagflorida.com\/wp-json\/wp\/v2\/pages\/1914"}],"collection":[{"href":"https:\/\/cagflorida.com\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/cagflorida.com\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/cagflorida.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/cagflorida.com\/wp-json\/wp\/v2\/comments?post=1914"}],"version-history":[{"count":0,"href":"https:\/\/cagflorida.com\/wp-json\/wp\/v2\/pages\/1914\/revisions"}],"wp:attachment":[{"href":"https:\/\/cagflorida.com\/wp-json\/wp\/v2\/media?parent=1914"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}