Yes, All Businesses Have Value, Even Those Losing Money. #COVIDstinks
We're all very busy these days pivoting, shifting, reinventing, and whatever new buzz word for "survival" that comes along. COVID has presented too many challenges for most of us. I am watching the businesses in my own neighborhood struggle, so much so that I am being asked more often, "How can I sell my business? It's a mess. We're losing money."
Well, my standard answer is, "ALL businesses have value." Your local banker may disagree, but we're not talking about applying for loans here. I am a Business Broker and one of the most important tasks I perform for my customers is a Business Valuation or an Opinion of Value. During this analysis, it is my objective to evaluate what the true picture of the business was (trends), is (value), and could be (projections).
Think about how you normally prepare your taxes. Do you maximize your profit to attract buyers every year, or do you minimize profits so Uncle Same doesn't take a huge bite out of your hard work? Of course, you minimize those profits. I'll disclaim, I do not work for the IRS. I will, however, keep an Opinion of Value honest.
Through a method of "add-backs", I'll assist you in creating the present and accurate financial summary of what your business should look to a buyer. Often, sellers are surprised that their business has value! Others are sadly underwhelmed because Uncle Frank told them they'd get a 6 times multiple on their top line. Don't get me started. We'll save that topic for another day.
This is important. Document your deductions. Put cash transactions through the register. Keep excellent records. If we can prove it, we can sell it. There are many means to forensically do a deep dive to reconstruct sound records, but doing it right the first time is the way to go. I digress. When you document and record your deductions, we have a verifiable record to work from. Buyers are fussy: they want proof.
Additionally, your business has value beyond equipment and profit. It is often called Goodwill, and that comes in many forms. One of our 1st & Main Partners Intermediaries is working with a sole proprietor in specialty trades. He cleans pools. The business was founded 30 years ago, and he's been successful working by himself. When we met him, he was ready to just shut down and walk away. We pointed out that his company did indeed have value: His phone number has 30 years of use - just the phone number represents future sales. He also had dozens of contracted work with apartment complexes! That is guaranteed revenue, although the contracts may be renewed or not. So, even a one-man show is marketable. By the way, the owner was making an easy 6-figures every year. That company is a perfect add-on to a larger firm looking to expand.
Another reason buyers may be interested in your business is for the lease! Location, location, location! Read your lease: is it "ASSUMABLE"? If so, the buyer assumes your lease at the current rates often realizing savings over a new lease in the same location. Also, your location is already built-out for the type of business they would like to do. Think of a bakery. Start-up costs to build out a new location are significant. However, your business is for sale at 1/2 the cost of the startup. Often called a second-generation location, a specific build-out is enough to attract the one buyer you need.
This is a primer on this subject. There are more complicated ways to market and sell a worthy business. Every circumstance is unique. Meet with your favorite Business Broker (hint: 1st & Main) to discuss your goals, create a plan, and get started.
If you or someone you know own(s) a business in Central Florida, and have considered selling, contact 1st & Main's Broker Carrie Duvall today. All consultations are complimentary and informative. In troubling times, it is always reassuring to know there is hope. We'd be honored to be part of the solution.
Carrie Duvall, Broker
(407) 476-4446 office