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How To Value A Small Florida Business

VALUING a small Florida business is often the most challenging part of the process for prospective business buyers and sellers. In reality, it doesn’t have to be an overwhelming factor. First of all, buyers must keep in mind that the “Asking price” of a business does not necessarily represent what the business is worth. Furthermore, you should realize that a buyer’s valuation is usually quite different from what the seller believes and rightfully so; they have their sweat built in to their calculation, most of the time.

You should also know that valuation is an art, not a science. The key to establishing a valuation benchmark is to utilize a variety of formulas. We are not a fan of the “Rule of Thumb” method, since we do not believe that any two businesses are exactly the same. Valuation must be done based upon what you, as the buyer, can reasonably expect to generate in your pocket, so long as the business’ future is representative of the past historical financial data.

Having said this, the most viable valuation method for small businesses, is the multiple method. This formula applies a factor to the previous year(s) Owner Benefit figure to arrive at a purchase price. The Owner Benefit figure is a combination of several factors:
Pre Tax Profit + Owner’s Salary + Additional Owner Perks + Interest + Depreciation

Typically, small businesses will sell in a one to three times multiple of this figure. Now, this is a wide range so how do you determine what to apply? The best mechanism we have found is that a one times multiple is for those businesses where the seller is “the business”. In other words: as out the door goes the seller, so too can go the customers. Consulting businesses, professional practices, and one-man businesses come to mind.

Two to four times multiples are for businesses that have been around for several years, have shown sustainable growth, have a solid base of clients, assets that will not have to be replaced in the immediate future, are involved in growth industries, etc. Of course, there is a lot more to factor into the equation and you must always keep in mind that value is a personal assessment.

One thing that you should do is to ask the broker to provide you with the rationale for how they established the asking price. A good business broker will educate the seller regarding the market, and overall valuations and will price the business to generate the greatest amount of interest possible.

Always keep in mind the inexact nature of valuations. Use a variety of methods. Understand how the price was determined, remember that valuation is a personal formula, consider the potential return on your cash investment, never, ever buy a business just because the price is right – first and foremost be certain that the business itself is right for you!

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Why Sell Your Florida Business Now?

The decision to sell a business with a Florida Business Broker is a very personal one, often relating to quality-of-life issues for the owner and his family. That being said, it is an extraordinarily good time to sell a business. The economy is strong. Interest rates are still low. The lending climate is favorable. And, of course, capital gains tax rates (which most business sellers can take advantage of) are at 20 percent.

Selling a business is the end of one journey and often the beginning of a new adventure. The business being sold often represents the bulk of the seller’s estate and the monetary value of the seller’s life’s work. The sale shouldn’t be rushed, but should be handled in a deliberate manner with proper professional help. The business should be prepared and packaged in a manner calculated to achieve the highest attainable price. The selling process should be managed in a way that maintains confidentiality and doesn’t interfere with day-to-day operations of the business. The transition to new ownership should be structured in a manner that ensures the continued health and viability of the business for both the employees and the new owners.

When handled correctly, the sale of a business can give the seller the money needed to start the next phase of his life, whether it leads to retirement, more time with family, the pursuit of other interests, or a new business venture. Although, at the closing, many sellers have mixed emotions about giving up their cherished “baby,” after the sale most sellers are soon exhilarated by their new-found freedom and prospects for life’s next adventure.

Learn how we can help you sell your business or view our may opportunities of businesses for sale

Buying A Florida Business vs Starting One

Every year thousands of people consider entrepreneurship. The two primary routes people use are starting their own Florida business or buying an existing one. Each path to business ownership has a variety of advantages and disadvantages that the would-be entrepreneur should consider.

Starting a Business
Starting your own business can be very rewarding, but generally requires an idea or concept that revolves around a unique product, technology, or marketing plan. Developing a business idea from scratch will usually involve less up front costs compared to buying a business, and can frequently be tested from a home or small office. You also won’t have to pay someone for goodwill. Keep in mind though that researching a new business idea is extremely important because frequently, ideas that seem to make initial sense do not after a detailed investigation. There may be little or no demand for the product or service, or competition may be so fierce that a profit cannot be made. Thorough research should tap as many resources as possible, such as the Small Business Administration, other business owners, the Internet, your local library, and relevant trade associations.
There are usually a number of disadvantages to starting your own business. You will need to attract customers, which can involve quite a bit of time and effort. Because there may be months or even years of few, if any, profits from the business, you may need to support yourself with personal savings. Financing a new business can also be very difficult. Most people rely on their family, friends, and personal funds to get them through the rough times until profitability. Another important factor to consider is the risk. The chances of survival for a start up business are very low. Some surveys indicate up to a 75% failure rate
Buying a Business
Buying a Florida business can be a more effective way to business ownership, but is frequently more costly. Existing business owners will expect you to pay a premium for providing you with an existing customer base and location. In addition, there can be contingent liabilities associated with buying an existing business, although structuring the transaction as anasset purchase can usually protect you from these liabilities.
The advantages to buying an existing business typically outweigh the disadvantages.
Existing businesses can usually obtain financing from financial institutions because they have an established history, assets, and a proven idea. Or, the seller of the business will provide a portion of the financing in the form of a loan. Established Florida businesses are less risky because there is an existing customer base, relationships with suppliers, operating processes, a known location, and employees have already been hired and trained. In addition, there is existing cash flow which will likely provide some immediate income to the buyer.
Experts generally agree that, in most cases, paying the extra cost for an existing business will outweigh the risks of starting one from scratch.

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Why Florida Business Deals Fall Apart

Deals fall apart for many reasons – some reasonable, others unreasonable.

For example:

• The seller doesn’t have all his financials up to date.
• The seller doesn’t have his legal/environmental/administrative affairs up to date.
• The buyer can’t come up with the necessary financing.
• The well known “surprise” surfaces causing the deal to fall apart.

The list could go on and on and this subject has been covered many times. However, there are more hidden reasons that threaten to end a deal usually half to three-quarters of the way to closing. These hidden reasons silently lead to a lack of or loss of momentum.

This essentially means a lack of forward progress. No one notices at first. Even the advisors who are busy doing the necessary due diligence and paperwork don’t notice the waning or missing momentum. Even though a slow-down in momentum may not be noticeable at first, an experienced Florida business intermediary will catch it.

The sooner this loss of momentum is addressed, the better the chance for the deal to continue to closing. Because the root of the problem is often an emotional issue, it has to be faced directly. An advisor, the intermediary or someone close to the person should immediately make a personal visit. Another suggestion is to get the buyer and seller together for lunch or dinner, preferably the latter. Regardless of how it happens, the loss of momentum should be addressed if the sale has any chance of closing.

We have many Florida Business For Sale at this time. Please view our website to find one for you.

Looking To Buy A Florida Business? Why?

Why are you looking to buy a Florida business? I want to:

> buying a job to earn a living
> acquiring an attractive lease or other real estate
> buying prestige (many business owners are respected community leaders)
> eliminating competition if you already have a business
> buying a hobby or retirement occupation
> seeking self-fulfillment and control of your own destiny
> seeking an opportunity for a child or other family member

Now ask yourself, what is it that I really like to do, and what is it that I’m really good at? If you have determined that you are a truly motivated buyer and you know the reasons that you want to own and operate a business, then you should begin searching only for those businesses that match what you like to do and ones that match your skills, capabilities and knowledge. Let us help you find that Florida business for your future.

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Why Use A Florida Business Broker?

One of the most frequent questions asked by prospective business buyers is whether or not they should hire a business broker. The initial response is always: “yes… but.” The “but” is that you should “use” one, not “hire” one. A business broker can have a very specific and important role in the buying process. The “but” is related to understanding what that role is.

Business Brokers in Florida almost always represent the deal in a transactional role. The seller pays their commission and even if they are assisting you in the process.

Business-For-Sale Listings

They can provide you with access to business-for-sale listings and details about the business that you may not discover on your own.

Always Good To Have A Buffer Between You and The Seller:

They can be a conduit to help deliver bad news to the seller. There may be instances where you have to retract or modify an offer and certainly times where you’ll need to adopt an aggressive negotiating position. Since you’ll most likely need the seller to train you after the purchase, it’s not a good idea to aggravate them too severely. As such, let the business broker deliver the bad news.

The Paperwork Is Astounding

A Florida business purchase, no matter how small, requires a tremendous amount of coordination and document chasing. The data you’ll need from a seller to evaluate a business, the documentation required to close a deal and the overall chasing that must be done between buyer/seller and their professional advisers, can be astounding. A good broker will be an enormous help putting all of it together.

A business broker cannot help you buy the right business. They can assist you, but ultimately it is up to you to make that decision. A business broker cannot afford to spend countless unpaid hours searching for the right business for you. The search is something that you must do. They’ll provide you with the tools to do it, but it’s your responsibility to get the ball rolling. A business broker cannot conduct the investigation for you. They may suggest common things to look for, but they won’t be your detective. A business broker cannot negotiate the best deal for you. Most will certainly attempt to bring all parties to a point of understanding, but if you want the best deal, then you must realize that nobody cares more about your investment than you do.

Don’t just call or email a broker inquiring about a particular listing. The point of your contact is to first determine how effectively they communicate and to get the dialogue going.

In your first contact, don’t ask for three years of financials or other confidential information. Simply express your interest and request that they send you a standard non-disclosure document to execute so they will be able to tell you more about the business – Help Them to Help You.

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5 Ways to Get the Best Price When Selling Your Florida Business

Selling a Florida business is the most popular exit strategy for business owners. In some cases, there are no successors who want to continue the business; in others, it was always the business owner’s plan to convert the business into liquid assets at a certain point. Whatever the reason you want to sell yours, following these tips for selling a business will help ensure that you get the best price and that your business sells.

1) Sell at the right time for the right reasons.
The most common reason for selling a business is that a business owner falls ill or gets too old to continue to run it – the worst time to be selling a business. For one thing, it’s going to be extremely difficult for you to deal with the additional stress of selling a business in those circumstances; for another, the buyer will use your circumstances as leverage against you.

So don’t wait until then. The right time is when you’re still hale and hearty and have a successful business to sell.

And what are the right reasons? Selling a business is very like selling a house in some respects. When you’re selling a house, you don’t say that you want to sell because the house is too small. You say that you want to move to be closer to work, for instance. When selling a business, you want to sell because you want to pursue a different opportunity or because you’re seeking a different lifestyle (such as retirement).

2) Be clear about what you’re selling.
Before selling a business, you need to consider what all the assets of a business are and decide what you are selling. Determine what physical assets you are selling and what other assets you have to sell.

Selling a business often includes assets such as good will, trademarks or client lists as well as physical assets. The value of these will depend on their quality.

If your business is incorporated, you also need to decide if you are going to sell your business as an asset sale (where you sell everything in the corporation but not the incorporated company itself) or a share sale (where you sell everything including your incorporated company).

3) Determine what your business is actually worth.
Facetiously but truthfully, your business is worth as much as it will fetch in the marketplace. But determining just what that price is the trick. There are several different business valuation methods ranging from asset-based to future earnings approaches. Of course, no one approach can be used in isolation; the current market, economic trends and what other similar businesses have sold for also need to be taken into account.

If I was only going to give one piece of advice about selling a business, it would be to have a professional business valuation done.

While legally anyone can do a business valuation, a business valuation done by a professional will be regarded more favorably by potential buyers and may save you legal hassles later on.

4) Make sure your house is in order.
When you’re selling your business, you need to be especially careful not to let things slide. In fact, this is the time that making the extra effort to keep things in tip-top shape can really pay off. Think again of selling a house; like a house that’s up for sale, you want your business to show well.

So whether you have any interest left in running the business, you need to make sure that you are keeping the business’s records up to ted ones.

You’ll also want to be sure that you’ve reduced your liabilities as much as possible, doing things such as settling any lawsuits and making sure all tax payments are up to date.

5) Get professional help when selling a business.
Selling a business is an even more complex transaction than selling a house – and arguably, one that has even more emotional impact. Besides providing necessary expertise to guide you through the selling process, hiring professional help can help you maintain the emotional distance and objectivity you need to successfully sell your business.

Florida Business Opportunities, Inc. will help you value your business in a confidential manner. Let us know when we can help. To view current business listings for sale, go to: