23 Feb Around the Web: A Week in Summary
The following information has been sourced by Business Brokerage Press for the benefit of the business brokerage community. The views of these articles do not necessarily represent the views of Business Brokerage Press. We hope you find this information helpful.
A recent article from Forbes entitled “Understanding Add-Backs When Selling Your Business” explores the process of determining the value of a business. A key figure in calculating value is EBITDA which is arrived at by adding certain expenses back into the net earnings. These certain expenses are known as add-backs.
Add-backs can generally be divided into seven categories:
- Abstract accounting expenses which are depreciation and amortization
- Interest expenses for loans
- Seller’s personal expenses such as cell phone bills and vehicle expenses
- Excessive expenses that a new owner wouldn’t need to continue paying
- Remuneration to the seller which are owner benefits like wages and director’s fees
- Non-recurrent expenses which will not be incurred by the business under new ownership
- Income reversal which involves removing sources of income that are not part of the core income generation model of the business
A recent article from Divestopedia entitled “Flirting with a Single Buyer for Your Business” discusses the dangers of only talking to one potential buyer when you are seeking to sell your business. While it may be appealing, it can also be detrimental.
Talking to only one buyer can be appealing to sellers because it seems like it would be easy (ideally this one buyer will be ready to buy), cost-saving (no broker fees) and the best way to remain secretive (no one else will know if you only talk to one buyer).
The reality is this one buyer may very well be unprepared, the unstructured approach to the sale can lead to a messy sale process and added professional fees, and confidentiality is protectable with multiple buyers through proper protocols that your broker will put in place. Widening the field to multiple buyers can lead to a more successful outcome.
A recent article from Business.com entitled “10 Things to Do Before Selling Your Business” offers helpful advice for business owners who are considering selling. This is a complex process with a very important outcome, so it is advisable to follow key steps to set you up for success.
When approaching the sale of your business, consider the following steps:
- Determine your business value
- Seek legal and financial expertise
- Hire a professional business broker to list your company
- Set a realistic asking price
- Get your paperwork in order
- Separate your personal expenses from the business
- Get offers in writing
- Improve your curb appeal
- Tie up loose ends
- Keep quiet until the sale is finalized