Day: November 4, 2023

Real Estate Sales

Buying and Selling a Biz

It’s true, it’s true…. Realtors’ can also help people buy and sell businesses!

While the formula for doing so isn’t the same as buying or selling a business, there is still an absolute formula to follow if you want to do it right.

Here are some of the SUPER fun considerations to look at:

  1. Earnings of the Company and how that factors in to the value. Two big terms here are EBITDA and Multiples. The EBITDA is the ‘Earnings Before Interest, Taxes, Depreciation and Amortization’. Why does that matter? Well… because people often ‘fudge’ their earning for tax purposes, and if you can get your hands on a few years of 3rd party (or audited) financials, you can deconstruct them to identify they TRUE earnings – or EBITDA. Then, you need to figure out what multiple applies to your industry. A multiple is basically the number that is multiplied by the EBITDA which can fairly place the value of the company according to other recent sales in the industry and their multiples. So – if you’re EBITDA is 100K, and based off your research you see that common multiples for your industry are between 4.5 and 5, then your value could be between 450K and 500K.
  2. Another thing to consider is the value of any assets in the company. Here you’ll need to look at a full list and you depending how big and how complex that list is, you may want to get an appraiser or subject matter expert to determine the overall value being offered.
  3. Another thing I like to consider, that many people overlook – is the LEASE (if there is one) on the property. Not all businesses own the Real Estate they operate out of, and if that’s the case – you need to know all details about the lease. Most importantly WHEN the lease expires and what RISK that’s going to add to your business. One of my strategies when representing a Buyer for a business is the successful renegotiation of a lease to gain favourable terms and to give stability to the new owner.
  4. The last thing that is also the most overlooked – is a simple business plan. I know – hard to believe.. but a LOT of people fail to do a simple analysis of the both the industry and the business itself, the competition and the risk that it faces on a Macro and Micro level. I’ve found that a quick overview of these aspects gives my clients enough information to make the proper strategic decision.

If you’re BUYING a business – you need all this stuff.

If you’re SELLING a business – you need all this stuff AND you need to advertise it properly. You should take the proper time (often 5 years) in getting everything ready for sale. There are certain things you can do TODAY to help make your business more valuable, which I’ll talk about in another post another day 🙂

Thanks for Reading.