One issue that we encounter on a regular basis when selling a business is the reluctance on the part of a business owner to provide information regarding their business to a prospective buyer. This reluctance is only natural. Private businesses are inherently private. However, a desire to not disclose information simply for privacy’s sake can … Continue reading »
Weighted average cost of capital is the cost to a business of raising capital. This capital can take the form of equity (common or preferred shares) or debt, or some combination of debt and equity. The cost of debt is generally determined to be the interest rate which would be charged to the business if … Continue reading »
EBITDA is an abbreviation that stands for earnings before interest, taxes, depreciation and amortization. EBITDA is an approximate measure of the cash flow available to the owner of a business prior to capital expenditures, working capital and debt-servicing requirements and income taxes. Other measures of earnings include: net earnings, net earnings before income taxes, EBIT … Continue reading »
Value is prospective. In valuing a business, the valuator is trying to determine what a notional buyer would pay today for a series of expected future cash flows. For large companies or companies undergoing rapid growth or significant changes in their business, this usually requires the development of a detailed cash flow forecast looking several … Continue reading »
There are many different business brokers operating these days and almost as many different fee structures. The standard fee structure that we have found to work well for sales mandates is: a small monthly work fee for the duration of the engagement; and, a percentage success fee upon the closing of a transaction. The amount … Continue reading »
There are several steps involved in selling a business and the process can be fairly lengthy (potentially as long as a year or more) depending upon the readiness of the business for sale, the number of potential buyers, the availability of financing, the seller’s price expectations and the seller’s commitment to the process. We have … Continue reading »
There are many factors that determine the right time to sell a business. Certainly external economic factors come into play – the stage of the economic cycle, interest rates, alternative investment options, industry trends, etc. can impact the timing of a successful business sale. Unfortunately, these external factors are beyond your control. What you can … Continue reading »