20 Mar Around the Web: A Week in Summary
A recent article from Entrepreneur.com entitled “10 Questions You Must Ask Before Buying a Business” lists the important questions any buyer should ask a current owner regarding the business in question.
When you become a business owner, you are likely to face certain risks. However, with preparation and due diligence there are also ways to diminish the level of risk that you’re taking on. When you’re taking the leap of buying a business that someone else has already built, it’s imperative to get a complete picture of the status and future of the business.
Asking the owner these ten questions will help you to get a clearer picture of the potential risks you may be taking on as well as asses your negotiating power:
- What are your biggest challenges right now?
- What would you have done differently?
- How did you arrive at your asking price?
- If you can’t sell, what will you do instead?
- How will you document the financials of the business?
- Do you have any past, pending or potential lawsuits?
- How well documented are the procedures of the business?
- How much does your business depend on a key customer or vendor?
- What will employees do after the sale?
- What skills or qualities do I need to run this business effectively?
A recent article from Forbes entitled “Are Business for Sale Multiples Going to Come Down?” explores the possibility that the currently high valuation multiples may be the new normal.
Given the favorable state of the economy, available funding sources and a high amount of unused committed capital in private markets, the possibility of middle market multiples remaining high is plausible. However, it is not possible to say with certainty that they will. In regards to business buyers who are considering whether they should wait for the multiples to decrease before buying or not, the simple answer is no.
While a buyer may pay a price for a business that seems a little steep currently, by waiting they’re also missing out on possibly years of profitability and growth. By weighing the potential loss by waiting to the higher amount you’ll pay for your business now, and the possibility that multiples may continue to rise, it becomes clear that it’s not prudent to hold off on buying in anticipation of multiples dropping.
A recent blog post from Sunbelt entitled “4 Steps to Reselling a Franchise” discusses the unique aspects to consider as a franchise owner when you decide to sell.
Purchasing a franchise is an appealing opportunity for entrepreneurs, with a host of benefits accompanying the purchase of an already established brand and business plan. Some franchisors even provide assistance in the sales process, and given the nature of ownership there is a slightly different process to selling your franchise than to selling a non-franchise. If you’re looking to exit your franchise business, follow these four steps for a smooth sale:
- Consult your franchise agreement – Many franchisors have specific guidelines and policies regarding the resale of your business. Make sure you’re aware of these policies before beginning your sale process.
- Contact your franchisor – After you’ve reviewed the written policies, contact your franchisor to alert them of your exit plans and to ask them a few pertinent questions like “What qualifications must a prospective buyer have?” and “Will I receive assistance selling my business?”
- Prepare the business for sale – Clean up, repair and situate all aspects of your business in order to receive an optimal selling price.
- Negotiate a deal & exit your business – Make sure to consult with your franchisor about any offers you receive; if they’re involved in the sales process they may require a screening of any potential buyers.
Selling a business is a complex process with many variables in play and pieces to put in place. Working with a business broker is an excellent way to protect your interests and make the franchise sales process that much smoother.