What You Need to Know Before Getting a Loan
If you’re like most people buying a business, you’ll probably need to borrow money to complete the acquisition. Although, you may obtain seller financing or a loan from friends or family, most buyers turn to a commercial lender for financing. Although different lenders specialize in making certain types of loans, in this article we’ll spell out some of the common principles, steps and business terms you’re likely to see when dealing with any commercial lender.
The major business points to be addressed in connection with a business acquisition loan often include the amount to be loaned, the interest rate, the fees and expenses charged by the lender in connection with making the loan, the term of the loan, the obligations (covenants) you’ll have to meet while the loan is outstanding, whether or not a portion of the principal must be paid back each month, and the need for security or a personal guarantee to be posted.
All lenders have what are known as “underwriting guidelines”. These guidelines set out the facts and circumstances (more…)Read More
Starting a new business is a daunting prospect for anybody, whether you are a budding entrepreneur or just an ordinary individual that wants to do what you love for a living. Whilst we all dream about quitting the day job that we hate and working for ourselves, there are many factors to consider and the process has to be fully thought through if you want to stand a chance of succeeding with your dream business.There are certain things that you should think through and processes you should complete before quitting your day job and buying your dream business. The eight steps below will provide you with a quick guide as to what you are supposed to do and help set you on the path to quitting your day job and buying your dream business.
Step One – Play To Your Strengths
If you are considering the possibility of acquiring your dream business then the last thing you want to do is to rush into buying any business that seems cool. You must have a passion for the business if you want it to be your ultimate dream business! Assess your hobbies and interests in line with the types of businesses available and ask yourself whether you would like to go into it for a career.
Step Two – Do Your Homework
Research the market and take a look at the business information you would need to (more…)Read More
1. What are the key motivators for people going into business for themselves?
Before making a decision to purchase a business, a buyer should understand his or her objectives to make sure those objectives can be met by purchasing any or a particular business. Most relevant surveys reveal similar responses and, interestingly, making money is not at the top of the list. Here is a list of the typical answers, in the order of importance:
To control my own future.
To work for myself.
To take advantage of my skills and abilities.
To make money.
2. Should I start my own business or buy an existing one?
An existing business has a historical track record (good or bad) which can be used to evaluate the business. An existing business has usually shown there is demand for its products or services, and it should have, among other things, detailed financial records. Sometimes, a seller will agree to (more…)Read More
In our Merger and Acquisition practice we try to prepare our business sellers for the multitude of different deal structures that they should expect from various buyers. We go through elements like cash at close, seller notes, earn outs, non-competes, escrow accounts, etc. More often than not our first time seller will actually put out his or her hand in a stop gesture and reply, “I only want the full price in cash at close.” This article will discuss some of the selling company characteristics that directly affect both the selling price and the terms.
Selling Company Revenue Composition –
This is a very important factor in determining how much a buyer will pay for your business and how much will be in cash at closing. If 80% of your annual revenue is a result of contractually recurring revenue, you can command both a premium price and a deal heavily weighted in cash at close. On the other hand, if you have little or no contractually recurring revenue and are heavily dependent on net new sales from new clients, your sale price will be far less and you will be expected to receive a significant portion based on a future performance earn out. Companies that can demonstrate (more…)Read More
14 Steps to Maximum Value and Profit
Professional M&A experts follow well-defined, orderly steps to sell a business. It is the only way to negotiate the best deal structure and price. As a business owner interested in selling your company, you will probably rely on an intermediary to take these steps for you. Even so, it is wise to understand the process so you can play an active, educated role in the sale of your business. Here are the 14 steps most often followed by professional M&A experts:
Step 1- Value Analysis
Studies have shown that 80 percent of privately held companies are sold for less than fair market value. For that reason, this step is critical to all that follow. A proper valuation of your business should involve the analysis of many factors, such as gross sales and profit percentage, company infrastructures, product or service leadership, current market conditions, growth opportunities, market demand for that particular type of business, and many others.
Step 2 – Sell Now or Later
Two main factors will decide whether you proceed to sell your business. One is (more…)Read More