25 Sep Around the Web: A Week in Summary
A recent article from Forbes entitled “Take Advantage Of The Golden Age Of Business Acquisitions” provides a list of reasons why SBA loans are a valuable tool for small businesses during a time period that is very favorable for growth via acquisition.
The current landscape of the business mergers and acquisitions market in the United States is most active in the small business sector. With droves of baby boomers retiring daily, a renewed growth strategy outlook amongst business owners, and an economy that favors business owners in need of financing, professionals are considering this a Golden Age. For many reasons, SBA loans are an excellent option for business owners considering acquisition. These reasons include:
- Lower equity requirements
- Funding is applicable for a variety of uses
- More franchises are eligible
- More affordable financing options
- Soft costs such as closing costs are eligible
- Flexibility on value
While SBA lending has its downsides, and is not for every business owner, for many its benefits outweigh the downsides.
A recent article from Axial entitled “You’ve Received an Unsolicited Offer to Buy Your Business – Now What?” discusses the important factors that an owner needs to consider once they’ve received an offer for their business.
As a business owner, receiving an unsolicited offer for your business can be very exciting; especially if the offer sounds good. For many entrepreneurs, even if they weren’t planning to sell their business, the right offer could change their minds. However, it is best in these scenarios to hire a team of advisors before agreeing to anything with another party. In this scenario your team of advisors would help you to address the following:
- Figuring out if the offer is fair and reasonable – Just because it sounds good doesn’t mean it’s actually what your business is worth. Without a proper evaluation of both your business and the offer, you can’t truly know if what you’ve been offered is worth taking.
- Managing the flow of due diligence information – In any business sale situation it is important to share information about your company in a way that most positively represents your company and its strengths. Your advisor can help you do so.
- Negotiation technique and approach – If you are unskilled in the art of negotiation, approaching it on your own can leave you very vulnerable.
- Allowing you to focus more time on running the business – Regardless of how sudden or exciting a proposed deal can be, the process that follows is lengthy and very involved. If you are spending a lot of your time working on the merger or acquisition, it could potentially leave your business unattended and vulnerable to a decrease in value. Having a team in place handling many pieces of the process allows you to keep the ship steering straight.
A recent article from the Mississippi Business Journal entitled “Estimating the value of your business” discusses multiple methods for determining the value of an existing business.
What a business is worth is dependent upon who is looking at it. It is commonly known that the value of a business is often much higher to an owner who founded the company than it is to an investor because of sentimental value. Different types of value include:
- Market value: “The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.”
- Liquidation value: This type of valuation assumes that the owner is in a time crunch to sell.
- Disposition value: Assumes a shorter than average marketing time.
- Going concern value: Assumes that the business will continue operating in the future.
Given the many factors that are included into the outcome of a valuation, it is important to have an unbiased third party professional perform the appraisal.