Selling Your Business? Here’s Why You Should Consider Hiring a Business Broker

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Selling a small business can be a complicated process. Between determining the value of your business, finding a qualified buyer, maintaining confidentiality, and navigating the legal aspects of a sale (all while continuing to run your business), there are a great deal of moving parts. 

It can be a lot to juggle on your own, especially when you add in the complexities of inflation and a high interest rate environment.

Yes, selling your business can be challenging, but it’s far from impossible…especially with the help of a seasoned business broker. If you’re thinking about selling your business, hiring a business broker can take some of the weight off your shoulders and ensure a smoother process from beginning to end.

5 Reasons To Consider Hiring a Business Broker 

1. Certified Business Valuation

A business broker can help you determine a fair price for your company by completing a certified business valuation. 

A business valuation is prepared by a certified, accredited valuation appraiser who analyzes data and reports on your business financials. To determine what your business is worth, they will analyze the sales of similar companies, industry trends, and other factors that can affect your company’s value.

Buyers like to see certified business valuations because they provide an accurate, unbiased  representation of your company’s worth. Not only will this put prospective buyers at ease, but it can also benefit you as a seller, helping you negotiate a sale price and ensuring you don’t leave money on the table at closing.

2. Effective Marketing Strategy

Experienced business brokers understand what a buyer is looking for — such as uniqueness in the market, a good track record of sales and profit, recurring revenue streams, a profitable niche, and so on. 

They know how to create a successful marketing strategy for your sale.

A good broker will create a marketing campaign that draws qualified buyers and shows your business in its best possible light. They will also help educate potential buyers on why your business will be a valuable investment for them.

Want help choosing the right business broker? Read our recent blog for tips to choose the right broker for you.

3. Manage Due Diligence

A business broker will help you navigate the legal complexities of a business sale by aiding in the gathering and organizing of documents and other important information needed for your sale. They can keep you up to date on the applicable laws and regulations your sale needs to comply with, as well as any necessary permits and licenses you should have in place.

Working with a business broker can give you peace of mind, knowing that the due diligence is properly taken care of so there are no last-minute surprises at closing.

4. Offer an Objective Viewpoint

Business brokers are not emotionally attached to your business, so they can offer an objective viewpoint that is crucial for a smooth sale.

The sales process can be emotionally wrought. A broker can help you maintain the objectivity needed for a successful sale, guiding you on best practices and what to expect throughout the sale and at closing. They can also act as an emotional buffer between you and the buyer if tensions run high during negotiations.

5. Maintain Confidentiality

Confidentiality is vital when selling your business. It’s important for the sake of your business, its employees, and its vendors. But it’s also a draw for buyers. When you sell your business, you want buyers to feel confident about purchasing your company, and maintaining confidentiality helps boost that confidence.

An experienced business broker knows how to market your business and find you a qualified buyer while also maintaining strict confidentiality. They’ll also obtain confidentiality agreements from all prospective buyers, ensuring your sensitive company information is well protected.

A broker can handle these aspects of selling your business (and more), so you can continue to focus on running your company. When you take all this into account, hiring a business broker is a no-brainer.

At OIB, our team of seasoned business brokers will utilize their experience for your benefit, helping you navigate the sales process through to a successful sale. Contact us to discuss your needs and get your business on the market.

6 Tips for Choosing the Right Business Broker for You

6 Tips for Choosing the Right Business Broker for You

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Whether it’s your first time or your 101st time, selling your business can be an overwhelming task. That’s why working with an experienced business broker can be so helpful. 

A business broker is different from a real estate agent. While a real estate agent may be able to help you sell your building, a business broker can help you sell your business. A broker acts as an intermediary between the buyer and seller, helping to negotiate the sale and ensuring the process goes smoothly. They also offer services like business valuation, marketing, identifying and screening buyers, and negotiation.

A good broker has the network and marketing skills needed to get your business in front of the right buyers and the negotiation skills to get you the best deal. Choosing the right business broker for your business type, needs, and goals is crucial to the success of your sale.

Let’s take a look at a few things to consider before choosing a business broker to sell your business.

1. Understand Your Needs and Goals

First, it’s important to have a good handle on your needs and goals for selling your business. Do you have needs that are unique to your industry? What are your goals for profits, timeline, and other factors related to your sale?

The type of business broker you choose will be, in part, determined by your industry and the specific needs of your business sale. It’s also essential that you can clearly articulate your needs and goals to your business broker so they can create a marketing strategy to suit your specific situation.

As you interview brokers, look for someone you feel comfortable enough with to openly communicate about your sales goals and reasons for selling. If your broker has a clear picture of your goals from the beginning, they will be better prepared to objectively guide you through the process.

2. Research and Evaluate Available Business Brokers

Next, do some research to find business brokers in your area who specialize in your industry:

  • Check with your network. Recommendations from trusted business peers is a great place to start.
  • Do an online search. Look for a broker who focuses primarily on business transactions, not just commercial real estate. You want someone who can help you sell your business — not just the building it sits in.
  • Ask for referrals from industry professionals (such as lawyers or accountants) who have worked with business brokers in the past.  

Once you’ve compiled a list of potential brokers, do interviews with them all. Over the phone or in person, ask them about their experience, credentials, communication style, and fees. It’s also a good idea to ask for references or testimonials from previous clients to gain insight into their experience working with the broker. 

Ultimately, you’re looking for an experienced broker who listens to your needs and prioritizes your interests.

3. Assess Professional Credentials, Licensing, and Experience

Finding a business broker with a solid track record is critical — as is finding one with experience relevant to your industry. When you’re deciding which broker to hire, examine not only the number of years they’ve been in business and their success rate, but also the types of businesses they’ve worked with.

The operational ins and outs of one type of business are vastly different from another. For this reason, the specifics of a sale will also vary widely from one business to another. Ideally, you’ll want to find someone who has experience in your industry and with businesses similar to yours. 

However, if you’re in a unique or niche industry, that may be more difficult to find. In this case, look for a broker with experience selling comparably-sized businesses with similar characteristics.

In addition to experience, take a look at the broker’s credentials and licensing. Credentials with associations like the International Business Brokers Association show you the broker’s involvement in the business brokerage community as well as a certain level of education and experience. 

Credentials can also indicate whether a broker has the knowledge and expertise needed to help you not just sell your business, but reach your goals for your sale.

4. Evaluate the Broker’s Marketing Strategies

An experienced business broker will be able to craft a comprehensive marketing plan that attracts qualified prospects, helping you sell your business quickly and profitably.

As you interview potential brokers, ask them how they plan to market your business and how they’ll identify and screen interested buyers. They should be able to clearly articulate their sales strategy and explain how they’ll keep your confidential information safe. A good sales strategy should cast a wide net, making use of both online and offline resources to promote your sale.

Talking to a broker’s previous clients can be helpful here as well, to assess whether they were happy with the broker’s marketing strategies for their sale.

5. Understand Fee Structure and Contract Terms

Before you choose a business broker, make sure you understand the fees they charge and how they are paid. While some brokers work entirely on commission, others may charge an up-front fee. 

A broker’s contract terms should outline their fees, as well as the scope of services and expectations for communication and reporting. Never sign a contract without first examining it thoroughly. Ideally, have a lawyer take a look at it before you sign. 

In fact, a reputable broker will encourage you to have your paperwork examined by an attorney. This helps reduce liability for all parties.

6. Check References and Past Client Experiences

Finally, ask all potential brokers for a few references from past clients. Contact all references and ask them about their experience with the broker’s professionalism, expertise, and communication skills. You want to find an experienced broker with a reputation for being ethical, honest, and trustworthy.

A word of caution: be wary of brokers who refuse to provide references, pressure you into signing a contract, or discourage you from seeking legal advice. A reputable broker will provide you with the information and time you need to make an informed choice.

Choosing the right business broker for your needs is a vital component of a successful business sale. Make sure to take the time you need to examine these details before hiring a broker to sell your business. 

If you are in search of a business broker to help you sell your business, the team at OIB would love to be considered. Don’t hesitate to contact us — we are more than happy to answer your questions and discuss how we can help steer you toward a successful sale.

Cash and accrual-basis accounting

Cash and Accrual-Basis Accounting: What’s the Difference?

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Keeping track of your financial situation is an integral and vital part of running a business. 

Whether you’re a seasoned business owner or just getting your first business off the ground, it’s important to understand the basics of accounting (even if an accountant handles the details for you). One of the most foundational elements to grasp is the type of accounting method you use to track your finances.

There are two main accounting methods that most businesses use: cash-basis accounting and accrual-basis accounting.

Here we’ll cover all your questions about the differences between cash and accrual-basis accounting, as well as how to choose an accounting method and why accounting is a critical part of running your business.

The Importance of Accounting in Running Your Business

In short, accounting helps you: 

  • Track income and expenses
  • Evaluate the performance of your business
  • Make sure your business is in compliance with state and federal statutes
  • Address taxes and other liabilities appropriately
  • Provide investors and company leadership with financial information to help set a budget and make future projections

Proper accounting gives you financial statements that provide vital information about your business, including profits, losses, and your overall financial position. These statements help you make more informed business decisions. 

In most cases, your financial statements must also be filed with the proper state and federal authorities. In Minnesota, businesses are required to file their financial statements annually with the Secretary of State. Public companies are also required to file them periodically with the Securities and Exchange Commission. 

Key Differences Between Cash and Accrual-Basis Accounting

Cash and accrual-basis accounting are the two most common accounting methods used by businesses. Depending on your business model, one may work better for you than another.  Ultimately, there are three key differentiating factors between the two: timing, complexity, and responsibility. Let’s take a closer look.

Cash-Basis Accounting

In cash-basis accounting, revenues and expenses are recognized at the time they are received or paid. 

This method focuses on your business’ cash flow, with a particular emphasis on cash on hand: Money that comes in is tracked as revenue; money that goes out as expenses paid. Revenue is reported on the income statement only when cash is received; expenses are recorded only when cash is paid out.

The biggest benefit of this method of accounting is that it is simple and easy to understand.

It allows a business to easily answer questions regarding their annual revenue, expenses, and financial losses. It’s also easier to align earnings with important dates, ensuring you pay your taxes on time.

Another benefit of cash-basis accounting is that you only have to pay taxes on money you’ve received — not on invoices you’ve issued — which can help cash flow. (However, not all businesses are allowed to use cash-basis accounting, so it’s important to confirm with state and federal authorities that your business is eligible for this accounting method.)

On the downside, cash-basis accounting makes it more difficult to grasp a business’ current financial health, as accounts receivable and payable are not used. Without this critical information, you can end up with big discrepancies in your records, and your financial statements could overstate the health of your company if you are cash-rich.

It also doesn’t help when you’re making management decisions, as you only have a day-to-day view of your finances.

Accrual-Basis Accounting

In accrual-basis accounting, revenues and expenses are recognized at the time of the transaction—even if the cash isn’t in or out of the bank yet. 

Revenue is recorded when a product or service is delivered to a customer with the expectation that the customer will pay for it in the future. Expenses are recorded before cash is actually paid out for them.

This accounting method involves tracking accounts receivable and payable to create an accurate picture of the financial status of your business. In case you’re not familiar:

  • Accounts receivable is money owed by customers for products or services rendered
  • Accounts payable is money your business owes to vendors or creditors

This method of accounting provides a more accurate picture of your business’s financial situation, as it takes more into account than cash flow.

On the downside, accrual-basis accounting is complex, requires much more detailed record keeping than the cash method, and can be time consuming. 

Many businesses, as they grow, find they need to outsource the bookkeeping and accounting tasks. As such, this method can be more expensive than cash-basis accounting, and therefore more difficult for smaller businesses to use. In some cases, it might make sense for a small business to start with the cash-basis approach and switch to the accrual-basis method as the company grows and requires greater accountability.

In addition, with the accrual-basis method, you may end up having to pay taxes on income before the customer has actually paid you. (However, if the customer doesn’t pay the invoice, you can claim the tax back on your next return.)

Choosing the Right Accounting Method for Your Business

When To Use Cash-Basis Accounting

The cash basis method is most often used by sole proprietors and smaller businesses with no inventory.

For newer or very small businesses, knowing exactly how much cash is available can be helpful to determine when or how quickly bills get paid. And in most cases, because it is so straightforward and easy to use, this method of accounting doesn’t require hiring additional staff. 

Plus, smaller businesses’ earnings tend to fall below the $25 million per year threshold for using cash-basis accounting set by the IRS.

For businesses with inventory, cash-basis accounting is typically not a good fit because it doesn’t allow for the accounting of inventory at the opening and closing of each tax year (though there are some exceptions to this rule).

When To Use Accrual-Basis Accounting

Accrual-basis accounting is the most commonly used method for larger companies (especially publicly-traded companies). The finances of larger businesses often have too many moving parts for the simple cash-basis method. The accrual method allows for more complexity.

A few examples of how the accrual method is beneficial:

  • Credit card payments. Such payments can post days or weeks after the transaction initially occurs. The accrual method provides a way to track those payments before they’re actually received/sent.
  • Tracking assets and liabilities. Accrual-basis accounting makes it easier to distinguish assets and liabilities by keeping up-to-date records of what items fall into either category and for how long.
  • Ensuring GAAP compliance. Publicly-traded companies in the U.S. must adhere to the Generally Accepted Accounting Principles (GAAP) as determined by the Financial Accounting Standards Board (FASB). These businesses are required to use accrual-basis accounting, as the cash-basis method doesn’t meet GAAP standards.

Additionally, accrual-basis accounting offers a more complete picture of a company’s financial situation—one that cannot be easily manipulated or misconstrued. The accrual method requires everything to be accounted for in a timely manner.

We hope this information is useful to you as you determine which accounting method is best for your business. The team at OIB would love to be a resource for your business: for more helpful information, browse our previous blog posts and consider following us on LinkedIn. 

And when you’re ready to discuss buying or selling a business, contact us to get started!

Top 5 Challenges Business Owners Face When Trying to Sell Their Company

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As a business owner, selling your company can be a daunting task. The business sales process can be time consuming, complicated, and emotionally draining.

No matter what’s motivating you to sell—finances, personal goals, family or health considerations, market conditions—there are a number of challenges every business owner will face throughout the sales process.

Let’s take a closer look at five of the top challenges of selling a business and how OIB can help you navigate them.

5 Challenges of Selling a Business

1. Determining the Value of Your Business

Determining the value of your business is crucial to a successful sale. Overvaluing the company can deter potential buyers, while undervaluing it may result in financial loss. 

A business valuation can be complex, and is dependent on somewhat abstract factors like location and anticipated earnings. Evaluating your business involves a detailed assessment of cash flow, projected growth, and internal and external risk factors that help determine your company’s fair market value. Industry trends and recent comparable sales play a role in this process as well.

Engaging a business valuation expert like OIB is your best bet to get the most accurate assessment of your company’s worth.

Learn more about the business valuation process in our recent blog: Business Valuation 101.

2. Preparing for a Sale

Selling a business can be a long process, and it begins long before you put your business on the market. Preparation for a business sale should begin as soon as possible to ensure that every aspect of your business is in optimal condition to attract the buyer (and the price) you want.

First of all, your business must be able to run without you. It’s essential that you plan your exit strategy now to ensure the business can perform well under new management. You need to make sure your team is strong, competent, and ready to succeed without you. In addition, make sure your accounts are in good order and all essential documents are easy to find. 

You’ll also need to prepare your financial records to ensure they’re not only accurate and up-to-date, but also easily understandable to a potential buyer. In advance of a business sale, you’ll need to prepare:

  • Profit and loss statements
  • Balance sheets, and
  • Tax returns 

Inadequate financial records can raise red flags for buyers, leading to a loss of confidence and delaying the sales process.

Ultimately, a well-prepared business is much more attractive to a buyer than one that’s put up for sale at the last minute.

So even if you think you won’t be selling your business for a while, start getting everything in order now. If your plans change and you decide not to sell, your business will be in optimal condition to bring you success for years to come.

3. Maintaining Confidentiality

Confidentiality is crucial in a business sale. Maintaining confidentiality throughout the sales process helps protect both the business and its employees. If news of the sale becomes public prematurely, it can lead to unsettled employees, lost clients or suppliers, and loss of revenue. 

This leaves you with a problem when it comes to finding a buyer: it limits the marketing of your business. Trying to sell a valuable asset without being able to include all of the important details to advertise it for sale makes finding the right buyer much more difficult. 

A business broker like OIB can help you discretely market your business, find the right buyer, establish confidentiality agreements with a potential buyer, and limit the premature disclosure of sensitive information.

4. Finding the Right Buyer

Identifying the right buyer for your business requires hard work and careful consideration. An ideal buyer should not only have the financial capacity to complete the transaction, but also be a good fit for the company’s culture with a clear vision for the future of the business. 

But finding potential buyers (much less the right buyer) can be difficult, especially if you’re concerned with maintaining confidentiality. On your own, you can leverage your network and industry connections to find potential buyers, but that may not be enough. Finding the most appropriate buyer for your business requires a coordinated, systematic approach.

A professional business broker like OIB can help you find and vet potential buyers for your business, so you can find the right one to lead your business into the future. Plus, a business broker offers an objective viewpoint, enabling them to negotiate more effectively and ultimately get you the best possible price for your business.

5. Transition and Post-Sale Support

Relinquishing your role as owner and disengaging from the business can be one of the most difficult aspects of selling your company. Whether you’re retiring or moving on to a new phase in your career, it can be hard to let go of the business you’ve led for years.

For your own sake and that of the company’s future success, you need a smooth transition post-sale. This means providing support to the new owners for a time, helping them acclimate to the company’s culture and operations. This may include training, consulting, or temporarily assisting with the day-to-day management of the business until the new owner is ready to take over fully.

Ensuring a successful transition doesn’t just benefit the new owners: it also protects your reputation and that of the company, ensuring a promising future for the business you’ve built.

OIB Can Help You Meet the Challenges of Selling a Business

These are only a handful of the challenges inherent in selling your business. Addressing these issues and more will require careful planning, a comprehensive understanding of the sales process, and the help of a seasoned business broker like OIB. 

The team at OIB can help you meet these challenges head on, maximize the value of your business, and ensure a successful sale and smooth transition.

If you’re considering selling your business this year, OIB would love to partner with you. Contact us today to discuss your needs and get your business on the market!

Don’t Be Afraid To Sell Your Business in an Increasing Rate Environment

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There’s no question that the world of business sales hinges on the leveraging and financing of deals. Considering this, you’d think that the higher interest rates we’ve been experiencing would be a huge deterrent to buyers.

However, that’s not necessarily the case. 

If you’re considering selling your business but are concerned about rising interest rates, read on to learn why you don’t need to be worried about selling in this increasing rate environment.

Historically, Interest Rates Are Still Relatively Low

While an initial look at rising interest rates can be scary (to buyers and sellers alike), it’s important to remember that, historically, we’re still seeing relatively low interest rates.

Although interest rates are higher than they’ve been in many years, they’re still a far cry from the highs of the early 80s, when rates reached an all-time high of 20%! In fact, the extremely low interest rates we saw in recent years were more of an anomaly.

Plus, the old adage “what goes up, must come down” exists for a reason. Inflation has already begun to slow, and, eventually, interest rates will follow. So those buyers who are turned off by a rising rate environment won’t be out of the game for long.

For Individual Buyers, a Few Percentage Points Won’t Make a Huge Difference

For individual buyers who get their financing through SBA-type loans or seller financing, the relatively marginal increases we’ve seen won’t make a huge difference on their cash flow. 

The truth is, if a business can’t adequately service the debt because of the increased cost, it’s probably not in a buyer’s best interest to buy, regardless of interest rates. While this may cause some buyers to lower their offering price to account for the added interest rate burden, it’s unlikely they’ll be completely deterred from buying. 

Plus, there are lenders out there who aren’t tied to the prime lending rate. A buyer working with one of these lenders won’t be as concerned about interest rates.

Private Equity Groups Have To Invest Their Capital

Institutional buyers like private equity firms exist to invest their capital. They really don’t have a choice in the matter: If they don’t invest their money, they have to return it to their investors (with a handsome return)…and we all know they don’t want to do that!

PEGs typically have to return undeployed capital within a relatively short window of time (usually less than 10 years). That means they’re nearly always under pressure to acquire and grow businesses. 

In the face of rising interest rates, PEGs will adapt as they always do, and they’ll continue to buy businesses.

Cash Buyers Aren’t Concerned About Interest Rates

While cash buyers aren’t the norm, they’re definitely out there. 

And for buyers who aren’t dependent on financing, interest rates are a non issue. In a cash transaction, no interest is being paid to acquire the business anyway. So interest rates should have no effect on the acquisition.

When It’s Time To Sell, It’s Time To Sell

Regardless of what the market’s doing, sometimes there are family, health, or financial issues that dictate it’s time to sell your business. And in those cases, it’s always the right time to sell.

In any market, a certain degree of uncertainty is inevitable. You can never know the perfect time to sell stocks or your home…and the same is true of selling your business. The best way to navigate this uncertainty is to keep an eye on the big picture in the context of your industry and maintain a lean, efficient company.

An added bonus of an increasing rate environment for a seller is that you’ll benefit from that higher interest once you reinvest the proceeds of your sale.

OIB Can Help You Sell in an Increasing Rate Environment

Having an expert business broker by your side gives you yet another reason you don’t need to worry about selling your business in a rising rate environment. That’s where the team at OIB comes in.

At OIB, we’re experts in business valuation, deal negotiation, and navigation of a business sale—in any environment. We’re also adept at helping connect our clients with the right financing: For example, we’re continually meeting with lenders whose cost of lending is not tied to the Prime Lending Rate, making rising rates less of an issue.

If you’re thinking about a business sale this year, OIB would love to partner with you to get your business sold. Contact us today to discuss your needs and get started.

Business Valuation 101: What Is Your Business Worth?

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As a business owner, there’s a high likelihood your business is your most important financial asset. Even so, if you’re like most business owners, chances are you don’t know what your business is worth.

The fair market value of your business won’t be found in your financial statements or tax returns. You won’t get the answer from your accountant or attorney. And the sale prices of similar business transactions can be hard to find, as sales agreements are usually kept private. 

You can find the fair market value of public businesses on the stock market, but that’s not the case for a private business. While public company valuations can provide some context, it’s hard to translate that data to a small, privately held business…even when you take into account the difference in size, stability, liquidity, and other factors.

So how do you determine the value of your business? This is where a business valuation comes into play.

What Is a Business Valuation?

In short, a business valuation is the process of determining the value of a business. During this process, all aspects of the business are evaluated in order to determine its overall worth.

However, it’s not as simple as it sounds. Business valuations are complex, subjective, and highly dependent on relatively abstract factors like location and anticipated earnings. They involve a fine-tooth assessment of cash flow, projected growth, and internal and external risk factors that help determine the fair market value of your business.

Ultimately, a business is like any commodity: it’s worth what a buyer will pay for it. 

If a buyer has a strategic reason to acquire a business, the sky could be the limit as far as value goes. If not, the value of your business may look very different. Having a professional evaluation of your business’ value is crucial to a successful sale.

At OIB, we help you determine a price that is both fair to you and attractive to a buyer, based on our extensive knowledge of the market.

We have a built-in advantage over most other appraisal firms: we’re engaged in the market of selling and buying businesses every day. We know what businesses sell for, because that’s what we do, day in and day out. Our valuation is more than an opinion: it’s supported by data from the sale of thousands of businesses, as well as from databases providing statistics from business sales across the country.

Why Would Your Business Need a Professional Valuation?

While the most obvious time to appraise a business is when it’s about to be sold, business appraisals are valuable in any number of situations, including:

  • Buy/sell agreements
  • Estate planning
  • Stockholder disputes
  • Tax disputes
  • Business expansions
  • Changes in partnership
  • Divorce settlements or other personal life changes

…and many more. But you don’t have to wait for one of these events to happen to have your business evaluated. Just as you should always keep your business plan up to date, it’s ideal to always have an updated valuation of your business so you’re prepared in case an event arises where you need it.

How Are Business Valuations Calculated?

There are four main types of valuation most business appraisers use: Liquidation or Other Assets-Based methods, Investment Value/Capitalized Earnings, Excess Earnings, and Discounted Cash Flow/Future Earnings.

  • The Liquidation or Other Assets-Based analysis estimates the resale value of hard assets, then subtracts business debts to reach an asset-based value. This method assumes the business will cease to exist and all assets will be sold to pay off liabilities. Liquidation is best used for businesses that aren’t making money and whose tangible assets are worth more than the value of the business (based on earnings).
  • With the Investment Value or Capitalized Earnings method, you would first determine earnings over the next 12 months, then determine the desired rate of return, based on risk. Risk is calculated based on a comparison of alternatives (bank, securities, etc) and the rate of capitalization. This method is useful for businesses that aren’t making money and whose value based on earnings exceeds the value of their tangible assets.
  • Using the Excess Earnings method, you would first determine the value of tangible assets, the cost of owning the business, and the value of earnings. You would then subtract the cost from the earnings to determine excess earnings. From there, you’d apply the rate of capitalization to the excess earnings. Finally, you would add the capitalized excess earnings to the tangible assets to determine the value of the business.
  • The Discounted Cash Flow (DCF) or Future Earnings method attempts to estimate future cash flows, and uses that to determine a business’ current value. However, this method is rarely used in the sale of a small business.

Ultimately, the most reliable indicator of your business’ value is what a buyer will pay for it. Buyers decide what they’re willing to pay for a business based on how much they think the company will make them. 

This means you need to be prepared to represent your business with well-presented documentation, an investment thesis, and knowledge surrounding how to counter price-chipping (a common strategy buyers use to lower the sale price by identifying possible issues with your business).

At the end of the day, evaluating a business is a complex process. Even if you follow every guideline and piece of advice you can find, there are assets or issues you’re going to miss. 

That’s why the best course of action is to call in a professional like Opportunities in Business. With our experience, specialized knowledge, and tools, we can give you the most accurate estimate of your business’s worth. Plus, as business brokers, we can help you find the buyers you need and guide you through a successful sale.

Contact the team at OIB today to get started on your business valuation.

 

Why OIB MN?

Why Hire Opportunities In Business? What Sets Us Apart?

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Selling a business is complex. 

From determining a sale price and knowing how to market your business to finding a qualified buyer and tying up the loose ends to close the sale, there are seemingly thousands of details to address. It’s a process that requires careful planning, often years in advance.

That’s where a business broker like Opportunities in Business (OIB) comes in.

Working with an experienced, trusted business broker like OIB could mean the difference between selling your business at a fair price with a smooth transaction and struggling through the process, only to lose money…or worse, not selling at all.

Read on to learn more about what OIB does and why our clients choose to work with us again and again.

What Role Does OIB Play in a Business Sale?

Expertise in running a business doesn’t necessarily translate to expertise in selling it. While some owners may succeed in selling their business on their own, the vast majority don’t have the expertise or knowledge needed to do so.

Having an experienced business broker by your side can make for a smoother, more successful (and, often, more lucrative) sale. A professional broker brings valuable skills to the table, including: 

  • The resources and expertise for accurate business valuation 
  • Effective marketing skills 
  • A firm understanding of current market conditions
  • Exposure of the business to a wide market 
  • The connections and expertise to help a buyer obtain financing
  • Experience closing business sales transactions

Hiring a business broker like OIB to handle your sale allows you to stay focused on what you do best: running your business.

When you work with OIB, we provide the services needed to bring your transaction to a successful close, including: business valuation, material and record coordination, marketing plan implementation, buyer qualification, sale negotiation, and transaction closing. We will also secure the advice of other qualified professionals—such as lawyers, accountants, and financial consultants—as needed. 

More Than 40 years of Experience

Established in 1981, the OIB team has more than 40 years of business brokerage experience. 

Over those four decades in business, we’ve participated in the sale and purchase of hundreds of businesses. 

Working with an experienced business broker like OIB gives you an advantage in selling or buying a business. As a seller, we’ll help you determine the value of your business, prepare it for sale, market it nationwide, negotiate the sale, and bring it to a close. And if you’re buying, we can help you find the business you’re looking for, negotiate a fair price, assist you in obtaining financing, and ensure a smooth closing.

Experts in the Business Sales Process

At OIB, we have broad business sales experience—there isn’t a single type of business sale we haven’t facilitated! \

We are experts in the process. From business valuation and preparing a business for sale to closing the transaction, we are involved every step of the way. We can even help buyers find financing options (including SBA and conventional loans), and connect our sellers with qualified buyers. Ultimately, there isn’t an aspect of the business sales process we can’t help you with.

And whether you’re buying or selling, we understand and respect the need for discretion and confidentiality that comes with a business transaction.

Knowledge in a Wide Range of Industries

We also work to become experts in every vertical we work in. As you can imagine, the operational intricacies of one industry can be vastly different from that of another. The sale of each business, therefore, will also look very different. 

Our team has helped clients from a broad range of industries buy and sell businesses. We’ve made successful sales in industries from wholesale manufacturing to credit card processing firms to foodservice…and many more. 

With each new account, we dig deep into their business and the wider industry, gathering information and asking questions to fill in any gaps in our knowledge. This due diligence allows us to learn the ins and outs of each industry so we can speak the language of that particular market segment and ensure a smooth sale.

Hundreds of Satisfied Customers

We have worked with hundreds of clients, and have earned a reputation for excellence in our industry. In fact, a significant portion of our business can be attributed to positive reviews, referrals from past clients, and satisfied clients returning to us for multiple transactions.

We have dozens of five-star Google reviews from happy past clients. Here’s what a few of them have had to say about working with our team: 

“Working with Mac not once, but twice, was a seamless process. Was always available when I needed to talk. Provided step by step process and details so that I could understand what was happening.”

“Peggy gets a solid 10 out of 10 rating from us. She was so helpful helping us sell our business and also extremely helpful to the buyers. She always answered her phone and responded to emails very quickly. She had the answers to any questions we had and gave us great advice through the process. Thank you Peggy!!!”

“Bill did a fantastic job helping me sell my restaurant. He worked with me to determine a fair price for the business and helped me navigate the sale even when things got a little rocky. Bill kept the buyers on track even when the usual cold feet came into play. He assured them of the quality of the business and helped them see and remember the reasons why they were looking to buy a business in the first place. Bill was extremely professional, but never pushy. I would recommend Bill to anyone who is looking to buy or sell a business!!!”

“We’re so glad we had Jim E. of Opportunities In Business involved in the sale of our liquor store from beginning to end. He dealt with prospective buyers professionally, represented our best interest and made certain all ‘t’s were crossed and ‘i’s dotted. He answered all of our questions while guiding the buyer through the paperwork and necessary approvals so that our sale went through correctly and swiftly. I highly recommend him!”

“We were referred to Peggy because of her experience in selling small businesses. With her expert guidance our business sold in about 6 months. She walked us through every step, was very knowledgeable and was a delight to work with. We are extremely grateful for her support and highly recommend her.”

“First class experience all the way around! Mac really set the bar in terms of knowledge, connections, experience, and overall professionalism. Highly recommend 🙂”

If you’re looking to buy or sell a business this year, or if you’re curious about the value of your business, Opportunities in Business would love to help. Contact us to discuss buying, selling, or a business valuation today!

Business Valuation

How COVID-19 is Affecting Business Valuation

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The recent COVID-19 outbreak is creating an atmosphere of uncertainty across the globe. No business is completely sheltered from its effects. While some businesses are pivoting their business models and innovating to meet changing consumer demands, the majority of businesses are struggling in some capacity, making it nearly impossible to forecast six months…one year…three years into the future. Present challenges and future uncertainty directly affect business valuations.

What is fair market value?

According to the International Glossary of Business Valuation Terms, “fair market value” is defined as “the price expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm’s length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of relevant facts.”

How is business valuation determined?

A fine-tooth assessment of cash flow, growth and risk factors allows a person to determine the fair market value of their business.

Cash flow: The impact of COVID-19 has resulted in the temporary closure of many businesses. Other “essential” businesses remain open but a vast percentage of consumers are concerned about contracting the virus and are choosing to limit their interaction with these places of business or avoid them altogether. As their revenue decreases, their profit margin decreases, reducing cash flow.

Projected growth: Another facet of business valuation is the company’s growth forecast for the foreseeable future. In the case of the current pandemic, and fueled by layoffs, pay cuts and job loss, both projected industry growth and national economic growth naturally decrease, directly impacting business valuation.

Risk factors: Both internal and external risk factors directly impact business valuation.

  • Internal risk factors: These include earnings history and expectations, cash reserves, customer and employee satisfaction and supply-chains.
  • External risk factors: Coronavirus or anything else that a company cannot control that affects the well-being of a company, is considered an external factor. They can be industry-specific or related to the local, regional or national economy. 

If you’re thinking about buying or selling a business right now, let us provide you with a solid business valuation so you can confidently navigate these uncertain waters. Reach us at 612.331.8392 or by email at info@oibmn.com.

Tips for Buying a Business During Uncertain Times

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Maybe you’ve thought about buying a business but in light of world events and the current economic crisis, you’re thinking about putting that dream on hold. We’re here to tell you that, equipped with the right resources, this may be an excellent time to make that purchase.

Investigate recession-proof businesses

Unfortunately, many businesses are hurting right now. In light of the quarantine and shelter-in-place orders, business owners are laying off workers and closing their doors. Many are afraid they may not be able to outlast the current crisis and that their businesses will fold. For every tragic story of struggling businesses, there is a story of hope – businesses that are thinking outside-the-box and businesses that are flourishing, despite the economic downturn. When it comes to purchasing a business, recession-proof businesses are excellent choices. They span many industries including food, home maintenance, auto maintenance, legal services and eldercare.

Do your research

Set yourself up for success by doing thorough research into the industry, market comps and the company’s books before entering into negotiations with a potential seller. Consider hiring professionals – a broker, an accountant and an attorney – to make sure no stone is left unturned. This may be the single biggest purchase of your life so investing in the research process is highly advisable.

Focus on tangible assets

Intangible assets include but are not limited to brand names, trademarks and customer base. Especially in a recession, the value of these assets may be largely irrelevant. The value of tangible assets, however, is easier to nail down, allowing the buyer to hone in on the actual value of the business regardless of the current economic situation. Ask the seller to itemize both the tangible and intangible assets to the best of their ability so you know precisely what you’re looking at. In a recession, make sure you’re paying the going rate for tangibles and substantially less for intangibles. This will prepare you to write a solid offer.

Operate with cash

During good times and uncertain times, one thing stays the same – cash is always advantageous. During rocky financial times, lenders may raise interest rates to mitigate their risk. The less you have to rely on financing, the better off you are and the stronger your offer appears.

Want to learn more? Check out our tips for savvy buyers!

If you’re in a good position to make a business purchase, don’t shy away in light of current events. This may be your moment. Contact us at 612.331.8392 or by email at info@oibmn.com.

OIB Business Terms

Common Transactional Terms & What they Mean!

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One of our main goals at Opportunities in Business is to simplify the real estate process. On this note, let us walk you through some common terms and definitions you’re likely to hear on the real estate scene! 

Add Backs: An expense that is not considered an actual expense but is added back to company profits. 

Asset Purchase Agreement (APA): A legally binding agreement between a buyer and seller that encompasses the terms and conditions of the sale. 

Asset Sale: Selling business assets to increase cash flow or to liquidate. Ownership of the parent company doesn’t change. 

Balance Sheet: A statement that lists assets, liabilities, expenditures, equity, etc. from the company start date until the present. 

Business Appraisal: The estimated value of a business. 

Bill of Sale: A document the seller gives to the buyer once a transaction is complete. It is proof of the transaction. 

Cash Flow: When expenses are deducted from net revenue, this is the remainder. 

Closing Statement: A document issued once all parties have signed on the sale and purchase and money has been distributed to the seller. 

Copyright: Legal protection to a content creator for their unique work. 

Commission: The amount a broker receives for facilitating a business sale. It is often calculated as a percentage of the sale. 

Covenant: A promise in a written contract or deed. 

Due Diligence: A period of time after signing a contract where the buyer can investigate financials and other business details in order to determine if they wish to move forward with the process. 

Deal Flow: The number of deals a broker is currently processing. 

Earnest Money Deposit: Money the buyer puts down in a transaction to clarify their intent to negotiate on the purchase. 

Escrow: Money held by a third (neutral) party on behalf of two transacting parties. 

Exclusivity: A period of time during which the seller is unable to list their property with another broker and the broker maintains the right to a commission if the property sells during this time. 

Fulfilled by Amazon (FBA): An e-commerce service in which third-party vendors store their products in Amazon warehouses and Amazon is responsible for fulfilling orders from start to finish. 

Hours to Manage: The number of weekly hours the management of a business requires – critical information for determining the valuation of a business. 

Letter of Intent (LOI): A document declaring the intent of one party to do business with another party. 

Listing Price: The price of a business listed for sale. 

Non-compete Agreement: A legally binding agreement between a buyer and seller in which the seller agrees not to compete with the buyer in a similar profession or trade for a certain duration of time. 

Non-disclosure Agreement (NDA): A legal contract between two parties that outlines the confidentiality of the business. 

Partnership: A legal business structure between two or more individuals. 

Profit and Loss Statement (P&L): A financial statement that summarizes a company’s financials over a period of time. 

Software as a Service (SAAS): A software application hosted over the internet as opposed to on a traditional desktop. 

Trailing Twelve Months (TTM): A report that details the past 12 consecutive months of a company’s performance data. 

Valuation: The actual listing price of a business. 

The brokers at OIB have the knowledge and experience to help you navigate a business purchase or facilitate the sale of your business. Reach us anytime at 612.331.8392 or by email at info@oibmn.com.