Posts Tagged "buy business"

Would You Buy Your Business If It Was For Sale?

Statistics show that on average a small business will change owners every five years or so. That means the longer you’ve owned your business, the closer you’re likely getting to selling it. Now, for those of you who are reading this and thinking “no way, I’ll never sell my company”…while that may be true – the content of this article is just as important to you if you’re allowing any of the issues we’ll cover to exist in your business. So, whether you’re going to be selling at some point, or you’re a fifth-generation owner running the family business that you’ll pass on to your kids someday, the strategies outlined here will make you more money until then. The key is to start thinking of your current business in terms of what someone looking to buy your company would see. Motivation: Let’s start with some business-valuation math. Small business sales are traditionally priced based on a formula called multiple of earnings. Simplified, it means that a prospective buyer considers what a business makes for its owner each year, and offers an amount usually between 1 and 3 times that value to buy the company. The multiple generally depends on how long the company has been in business, how competitive it is in the current market and how easily a new owner could assume control of the operation. Goals: What’s it going to take to make this happen? The first goal in improving the value of your business will be to increase your earnings, which is the first element in the valuation of your company. And, since we can’t change how long you’ve been in business (except by staying in business), the next goal is to improve the competitive positioning of your company in the marketplace. Finally, goal number three will be to transition your business to a model that runs itself with more of your guidance and less of your direct participation wherever possible. Again, those of you that feel like you should stop reading because you’ll “never sell”, hang in here for a few more paragraphs…this is going to make a ton of sense to you as well. Problems, Challenges, Headaches. If there is something going on in your company that would concern a potential buyer, chances are it’s taking a big toll on your ownership as well. The fact that you have been able to adapt or “work around” the

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