How to read business figures and value a business

POSTED IN Buy And Sell Business, Buying A Business, Selling A Business

Business Advisors Matt & Liz Raad, Mal Emery

A couple of weeks ago we presented onstage at Mal Emery’s event about buying, building and selling businesses (awesome workshop by the way!) and over the course of the weekend through speaking with the many various business owners there I was reminded of the importance of business owners being able to clearly interpret their own business figures and understand how to value a business.

This is the one area of business where we constantly see business owners make big and costly mistakes because they have no idea (or maybe they are burying their head in the sand?). If you can’t interpret your businesses figures in a practical way you will really struggle long term in your business and you will make wrong business planning decisions that will hamper your business growth.

What is particularly scary to us is that we see business owners rely on their financial advisors like accountants who don’t tell them until its too late that they are losing heaps of money. When I first became a business broker this constantly surprised me as I would often come across business owners asking for me to help them sell their businesses that were clearly going backwards rapidly to the point of being bankrupt. What actually amazed me the most is that you could see in their figures (that were prepared by an accountant) that the business had been struggling and in serious trouble for several years – why didn’t the accountant start giving them some serious warnings or business advice years ago rather than wait. Often the business owner had no idea until too late and yet if they knew how to read figures in a PRACTICAL WAY they would have been fine and could have made better business planning decisions.

If you are in business or thinking of buying a business, make sure you understand how to read business figures in a practical way and especially how to see any red flags in the figures and what you can do about it. This kind of business knowledge will definitely pay-off for you on your entrepreneurial journey and it’s actually not that difficult.

Why can I say this so confidently? Because ALL the successful business owners we know (and especially those that made millions from buying and selling businesses) could read, understand and interpret business figures and value a business. I was lucky that I got to work with these guys personally and see how they did it. Most had their own unique ways but basically at the end of the day I noticed that you should be able to value a business and work out what the business is doing “on the back of an envelope” as a first sweep and 9 times out of 10 this would turn out to be a reasonably accurate business valuation.

Liz and I are quite passionate on this topic to make sure business owners are empowered in their own businesses to be able to read and understand the figures themselves. So I am looking forward to this weekend teaching our high level coaching clients exactly how to do this at our upcoming inner circle mastermind and boot-camp.  I have decided that in addition to the usual mastermind I will run a special session on reading business figures. We are also going to hotseat some of clients figures because as a group I believe we can learn a lot better doing it as a hot seat as the actual owner is sitting in the room with us to explain what has happened in the business (rather than just trying to read off the figs).

Obviously, for the majority of you reading this article you are not going to be at our boot-camp, but I urge you to make the effort understand your figures in a practical way (not some “theoretical” way) and review your figures regularly so that you can make more accurate business planning decisions which will ultimately help you be more successful in your business growth.

 

Why It’s A Great Time To Be Buying and Selling Business

POSTED IN Buy And Sell Business, Buy and Sell Websites

We just finished the webinar with Mal Emery, and it was great to hear his no-holds-barred attitude to getting out there and buying businesses to sell.

We know it’s a fantastic time to be buying and selling websites because we’re right in the middle of the online boom, with valuations rising and the amount of serious money invested into online business growing by the day.

But it’s also a great time to be buying traditional offline businesses to sell as well. There is currently a “cleanse” happening as Mal tactfully put it, with lots of businesses going under and many more finding it tough. Many of these businesses are good businesses in disguise – run down by the owner because they really dont know what they’re doing.

And if you’ve got the knowledge and skills to turn them around, you can negotiate yourself a fantastic deal on the buy, and then sell for a great price relatively quickly. As we say, there’s always a market for a good business, “a money making machine” as Mal puts it.

We’re really looking forward to presenting at the Cash-Out event this weekend, we’ll be sharing our strategies for turning a business into a highly sellable fortune, and also our profitable online buy and sell strategies.

If you would like to attend, there are still places left – but not many after tonight with the webinar full to capacity and having to turn people away, we’re sure the same will happen for this weekends event.

Click Here if you would like to book in

See you there!

Matt and Liz

 

 

 

Join Us Live With Mal Emery!

POSTED IN Buy And Sell Business, Buy and Sell Websites

Join Matt and Liz Raad LIVE on Tuesday night with the “Millionaire-Maker” Mal Emery on a special Buy and Sell Business Webinar.

You’ll get to hear how Mal has made millions of dollars from buying building and selling businesses, and how he does this with as little as $1! Plus you’ll hear how we make fast cash-flow and profits from buying and selling online businesses and websites.

Best news is – it’s FREE!

Places are limited so click here now to reserve yours now!

 

Business Brokers, Why hiring the right broker can make or break the Sale

POSTED IN Buy And Sell Business, Negotiation, Selling A Business

If you are thinking about how to sell your business and have considered handling the business sale process on your own in order to ‘save’ on business brokers fees..STOP!

Now obviously I am biased but if you want to sell your business and even if you are looking to buy a business you need to have a business broker on board. For 95% of business sellers/buyers valuing a business for sale is a completely unknown business skill. Also it can be very challenging having to deal with all aspects of a business sale or purchase by yourself and a good business broker will be experienced and able to steer you through the process with ease.

Why do I need a Broker to Sell my Business?

Selling a business requires specialised business sales knowledge. It is not like selling real estate. There are many variables involved and often highly specialised skills are required to sell your business, especially in two key areas:

  1. Valuing a business for sale
  2. Actually getting the deal completed and over the line

A good business broker will have the specific experience that other standard business advisors or you the vendor just don’t have. They will often have access to currently qualified business buyers and will be able to evaluate how serious or suitable they really are. Also why it is important to sell your business with a business Broker is the project management role a Broker can take on allowing you as the vendor to continue to look after the day to day running of your business.

“How Do You Sell A Business?” Negotiation: the key to successfully completing the business sale…

As business advisors, whenever we are asked “How do you sell a business?” we always discuss the hugely important aspect of the business sale process which is the negotiation skills of the business broker.

Negotiation is a crucial factor for achieving a successful business sale and is the number one area we find most vendors handle very poorly because they are too emotionally attached to the outcome of the sale of their own business.

Our experience is that having the right negotiator or business broker can make or break the sale of your business.

Negotiation includes staying in contact with the prospective business buyer, showing tenacity in working out a good outcome for all parties, and being sensitive and approachable at all times.

What can I expect Business Brokers to do for me?

An important part of the business broker’s role is to get to know enough about your business and your industry so a selling memorandum can be created. This will also play a key role in valuing a business for sale. The descriptions and information provided in the selling memorandum are the first impression a potential business buyer gets of your business and should be designed to entice the business buyer to want to find out more.

Furthermore, the Broker can help you manage other professionals involved in the business sale such as the Accountant and Lawyer and bring them all together as a team. As the Broker is involved at the overview level of the sale, he/she will know best when to start the actions and preparation of relevant documentation.

How do I find the Right Business Broker for me?

You can examine the Business Brokers experience, qualifications and industry knowledge but ultimately, deciding factors should be that you can work with the personality the Broker displays and whether he/she shows commitment to be your guide and bring the business sale to a satisfactory outcome for you and your business buyer.

When you approach business brokers gauge the amount of enthusiasm and the type of questions he/she is asking. This will give you a feel for the level of interest and knowledge in your business ideas and therefore the sale.

The most important selection criteria for your business advisors:

In addition to the obvious “are they capable” and “are they go-getters” etc, we suggest that ultimately, the most important determining factors for your business advisors are:

  • do you like them?
  • do you trust them?
  • and are they responsive?

Because remember that you are handing over the sale of your business (your livelihood and often life’s work) to this person AND you will be working closely with them for some time, so you need to trust them completely as a business advisor.

Final Thoughts on Business Brokers…

Good business brokers are invaluable not only in valuing a business for sale and business sale negotiations, but also in helping you with your overall exit strategy and ensuring that you sell your business for more money than if you tried to do it yourself.

When to Sell Your Business?

POSTED IN Buy And Sell Business, Recommended Reading, Selling A Business

How do you know WHEN to sell your business? – what is the best timing to ensure maximum sale price and to sell your business fast?

When to sell a business is a common question we hear as business advisors. In this article we are going to give you some guidance on business sale timing and outline some of the key issues that you should address before putting your business on the market.

Is there a best time to sell your business?

Firstly, the age old question: Is there a best time to sell a business? Here are the two best business ideas to answering this:

Business Sale Idea #1: Sell your business when the business is booming or after a good year ie there is clearly good business growth

Business Sale Idea #2: DON'T sell your business when the business is on the down or after a bad year

Seems obvious and often easier said than done, but if you want to maximise the sale price, these two best business ideas work every time! We see so many business owners try and sell after a bad year – they leave it too late and they can pay a big price for leaving it too late.

Here's why showing buyers your business is on the up with good figures and good business growth is so important:

  • It impresses them!
  • It shows the business is successful = gives them more confidence to go ahead with the deal
  • It makes it much easier for business buyers to get funding
  • It gives them less to bargain with you in the final negotiations – good figures are hard to argue with!

Also something that you may not have considered is that it is better for a business buyer to come into a business showing good business growth ie on an upswing, because profits will be high and they will have more chance of doing well and surviving in their most vital first year of taking over your business.

Getting the actual timing right…

As business advisors, here's our best advice if you are thinking of selling your business:

Don't leave it too late!

As we say repeatedly in our seminars – don't just rock on up to the market and expect to sell your business for top price! It just won't happen in the current market.

You will need to plan and prepare. Start planning now and getting everything in order. If you have been following what Liz and I say and teach, you will know that it is far better to ALWAYS have your business in a sale ready state so no excuses here!

Our experience is that it is ideal if you have 12 months (or more) to prepare fully for the sale of your business. However, you can rapidly get a business ready for a top sale price in 12 weeks -and of course we have a program that helps you do exactly that! Just check out our excellent 12 Week Turn-Around Program at http://The12WeekTurnaround.com which gets your business ready for sale within 12 weeks so you can sell your business for top dollar and sell it fast!

Business Brokers: 3 Things you should know when engaging a Business Broker

POSTED IN Buy And Sell Business, Negotiation

When you have decided to buy and sell a business, it is a good idea to engage a business broker to guide you through the buying and selling process as safe and smoothly as possible.

As a seller the business broker can take on a large part of the actual business sale process for you and help you enormously with your exit strategy. In the case of buying a business, brokers inevitably end up as pseudo business advisors and can give you many profitable business ideas to help you buy a business.

1. A business broker can help coordinating your professional team of business advisors

If you buy and sell a business, the broker takes on the intermediary role and helps coordinate the entire team of professionals required to bring the business sale/purchase to a satisfactory outcome. In some cases the broker might advise or at least point out where to find appropriate, reliable business advisors such as accountants or lawyers if you do not already have your own. The broker will know at what stage to involve who and which documents are necessary to be prepared so it is a good idea to have a good broker who can coordinate and motivate the team well.

2. You can ask to be fully involved in the business sale – or not

Depending on your personal situation, you might like to be fully involved in your business sale or purchase of a business or you might like to rely on a professional business advisor such as the business broker to look after all aspects for you. As a business seller, meeting all the potential buyers can be a good experience or you may prefer to leave the screening of the buyers to the broker so you can get on with your business.

If you are looking to buy a business you may have your own “buying a business checklist” or you may prefer to rely on the broker to get all the relevant information for you. Either way, a business broker is a qualified and ideal intermediary to help in the purchase or sale of a business.

3. Profitable business ideas – It’s not always about the money

Business sales and the final deal are made in many ways and price should not be your sole requirement towards a successful outcome for the purchase or sale of a business. If you look at price only you may actually lose out on potentially better buyers or a better deal on either side of the buy and sell a business game. A business broker should have many profitable business ideas to help make the deal work. Some of the best business ideas to consider in a business sale would be options such as vendor finance, earn-out plans, no money down strategies, extended settlement, extended hand-over assistance or other ways to negotiate a successful outcome for all parties. Tact and excellent negotiation skills are required in such deals and a broker will be more able and objective in creating such deals for you.

The Final On Business Brokers…

Beware of business advisors who make comments or statements about your industry of which they clearly know nothing, and most of all, ask for clarification whenever you do not understand the jargon or meaning of something in the sale process.

While you most likely are quite capable of playing the buy and sell a business game alone, the many steps on the way are not to be taken in a casual manner and by engaging professional business advisors – and specifically I mean business brokers, you will avoid many costly and time consuming mistakes and ultimately achieve a far better result when you buy a business or implement your exit strategy.

Vendor Finance: The Easiest Way to Sell Your Business For Maximum Price!

POSTED IN Buy And Sell Business, Recommended Reading, Selling A Business

Are you interested in learning about the simplest and easiest no-brainer way of getting maximum sale price when you come to sell your business? –This is a superb business exit strategy that most business sellers dont use or refuse to use and in doing so, do themselves out of hundreds of thousands of dollars and most importantly makes the sale much easier and quicker?

As a seller using vendor finance is an incredibly powerful way to get the maximum sale price for your business, to get that big sales multiple. We have been involved in deals where the simple offer of vendor finance made all the difference between the business sale going through or not going through.

With the challenging bank finance situation these days you the seller will often be in a far better position to finance the business. In this day and age the easiest and most effective way to sell a business quickly is to offer vendor finance and its not as difficult as you think!

What is Business Vendor Finance?

Vendor finance is simply where you the seller (vendor) help finance the buyer into your business, usually by allowing them to pay a lesser amount than the agreed sale price of the business on settlement and then pay off the remainder over a period of time.

I believe it is becoming more and more important for sellers to consider vendor finance and we are now seeing a lot more business deals in Australia that involve some form of vendor finance. Especially in the current environment where the banks have tightened up considerably on small business finance which means that it is increasingly important for vendors to consider vendor finance.

Lets take a look at why this simple strategy is so powerful when it comes to selling your business…

  • Widens pool of potential buyers
  • Shows you have got confidence in the business
  • Easier for them to buy
  • Your competition does not offer it (ie other sellers)
  • It is far more simple than you think

The biggest advantage of offering vendor finance is that you are making your business more affordable to more business buyers ie you are vastly broadening the net of potential business buyers.

To illustrate what we mean lets take a look at this simple exercise we run at our workshops. We will ask a room full of business buyers and business owners the question:

"Who has $1 Million or more to buy a business?" Very few hands will go up.

  • When we ask: "has anyone got a $100,000 to buy a business?" A couple of hands go up
  • "Has anyone got $50,000 to spend on a business?" A few more hands go up
  • "Has anyone got $20,000 to buy a business?" Now more hands are starting to go up
  • "Who's got $10,000 to buy a business?" Now many more hands up in the air
  • "Could someone put $5000 towards buying businesses?" As you can imagine we now have a room full of people with their hands up in the air.

The point of this simple exercise is to show you that as less money is needed to get into a business, there's a lot more buyers suddenly coming in to the market. This is exactly what we are doing with vendor finance -widening the pool of available buyers to vastly increase your chances of selling the business for more money.

Vendor Finance solves the major hurdle when it comes time to sell your business!

Vendor Finance overcomes the main challenge that all your buyers will face -the banks actually lending them the money to buy your business. Keep in mind that there are not a lot of individuals running around with $500,000 ready cash in their hands.

Most buyers will need to borrow money to purchase your business, and many in the current market will not get a loan off the bank. Does this make them a bad candidate for owning or buying your business? Generally No. Are you willing to let this large pool of potential buyers for your business slip by? -The answer should be NO!

Also, keep in mind that when you have more buyers you have more options especially when it comes to negotiating the sale price of your business. Its just simple supply and demand: more business buyers to chose from means you can generally ask for a better price as you have more buyers competing to own your business.

There are many ways to offer vendor finance to a potential buyer of your business. We wouldn't necessarily advertise that vendor finance is available (it depends on the deal/situation), -sometimes it is better to keep it up your sleeve as a negotiation tactic, BUT make sure you are prepared and know your options. Have a plan in place which includes the amount of vendor finance and potential terms and the sort of person you can offer it to.

In our opinion this is a superb business exit strategy that all business sellers should consider. We cant emphasis the value of offering some vendor finance enough.

So when it comes time to sell your business make sure you are prepared and factor in some provision for vendor finance -it will help your business sale be much more successful, and not only more profitable but also quicker and easier!

Special Presentation Fast Forward Your Business

POSTED IN Buy And Sell Business, Workshops

As business advisors we are very excited to be special guest presenters at the upcoming Roger Hamilton “Fast Forward Your Business” event in Brisbane.

This special event is about powerful new business ideas and preparing yourself and your business for the future and about taking advantage of the upcoming global changes that will affect all of us in business.

Read more about it… http://xo.platformdirect.com.au/ffybML

Roger Hamilton is a business visionary and leader and at this event he takes us through what our economy, technologies and customer’s habits will look like in the next 5 years. Roger shows us that they are changing rapidly and you need to be ready to profit from these and the global changes that are taking place.

In the coming years, your customers will:

  • buy differently
  • pay differently
  • be served differently and
  • have entirely different expectations on what they want and how they want it.

If you are interested in learning about the best new business ideas:

  • The Top 10 business trends that will make or break your business in the next 5 years
  • How to future proof your business for future success
  • Immediate steps and powerful new business ideas to profit now from the changes taking place.
  • Finding out how, if you don’t start taking action, your competitors will accelerate their businesses ahead by building their teams and harnessing resources differently, promote and partner differently and transform the way they make money.
  • And much more….

Then make sure you come along and learn from Roger Hamilton and ourselves (Matt and Liz Raad)!

Simply click here for more details… http://xo.platformdirect.com.au/ffybML

Roger Hamilton will also have several key guest speakers (including Liz and I) from all areas of industry who are focused on making one heck of a difference in their business and to the people they work with, and they will also be sharing with you their most profitable business ideas for the future years ahead.

If you are interested in coming along, then you can book now at:
http://xo.platformdirect.com.au/ffybML

We look forward to seeing you there!
Matt and Liz Raad