Missouri biz to sell – Angel Consulting (314) 221.4378

When you sell your Missouri business, and your first opportunity to qualify the small business buyer, will usually be by phone. It’s important that you control this conversation by asking the buyer a series of qualifying questions. But in fairness, you will have to answer a few questions from the prospect as well. Otherwise, they will not feel comfortable moving ahead with the process. Explain the absolute necessity of confidentiality and tell them you have prepared a Selling Memorandum which they are welcome to read after signing a confidentiality agreement.But you can give some general answers to the most basic questions now.Here are some questions you should be prepared to answer when you first talk with your prospect:

1.) Why are you selling?
2.) What is your price? Will you finance? What down payment are you looking for?
3.) How long has this business been in existence?
4.) How long have you been the owner?
5.) Will you stay on for a training period? / Will you be available after the sale for consultations?
6.) How much income can a new owner expect in the first year?
7.) What are the opportunities for growth? / Why is this business unique or special?Much of this information will have already been provided in your advertisement, but if you are talking to a buyer who was referred by your account, lawyer or some other source, this may be new information to them. Still, you should try to answer these most basic questions without divulging any confidential information.Question #1 is perhaps the most important question. A lot of the advice buyers read and hear them to be skeptical of an owner’s reasons for selling. After all, why would anybody want to sell a thriving business? Missouri buyers don’t have the right to know all the details about personal issues like health or a divorce, but you do need to have some prepared response to this question (health, retirement, pursuing new opportunities) that sounds reasonable and positive.

Hopefully question #7 will be the focus of the entire conversation. If you haven’t already done so, take some time right now to list some of the positives about your business.Taking The Next Step: After answering a couple of questions, try to get an e-mail address or fax number where you can send the confidentiality agreement. Let them know that once you have received this form, you will send them your Selling Memorandum with more detailed information.Any viable, professional and reasonable candidate should be perfectly agreeable with this process.Anyone who wants you to give them detailed and personal information about your business without signing a confidentiality agreement is being unreasonable.
If they are unreasonable now, they will be that way throughout the entire process.You can save yourself a lot of time and frustration by cutting them loose right now.

One Other Piece Of Advice: In all your phone conversations take notes. Your prospects will give you clues on how to sell them – if you get them talking about their goals and priorities.

It may be weeks before you meet in person and you’ll forget too much valuable information in the interim if you don’t take notes.Notes about what?Their goals, their aspirations, their experience, the names of their spouse and children, why they want to own their own business, those aspects of your business that most interested them, etc. etc.The selling process begins the moment you first speak with your prospect. Start to learn as much about them and what makes them tick as you can. It will pay dividends as you move into the negotiating phase of the sale.

Selling Your Business to a Buyer in Missouri

Some owners have a figure in mind of what their business is worth; often it's inflated because of their emotional attachment. On the other hand, many owners undervalue their business because they do not understand the technicalities of the various valuation methodologies and which of these is most appropriate for their specific business type.Experience has shown that there is also a large percentage of business owners who do not know what their business is worth, nor how to go about establishing its true market value. Link uses many of the established valuation methodologies, often using a range of different options in combination to establish the most accurate figure. This figure is then further scrutinised by comparing the theoretical value with current and historical sales information from the Link database. This ensures that the valuation appraisal accurately represents what a purchaser will pay in the current market.Profitability and RiskMost businesses are valued based on a combination of assets and the cash surpluses generated. The risk factor of the specific business is also taken into account. This is the degree of threat from existing or potential competitors, changes in technology or consumer trends and many other factors that may affect earnings or costs."Barriers to Entry" is another issue that is taken into account and involves evaluating the degree of difficulty or barriers a competitor may face should they decide to establish a similar business. For example, businesses which require minimal capital investment or technical knowledge are said to have a very low barrier to entry and consequently, may have a lower value.Most businesses are valued on a "going concern basis" rather than the value of company shares. Purchasers are reluctant to buy company shares for a variety of reasons including the unknown possible future tax, credit or legal liabilities, or the danger of inheriting contingent liabilities based on historical trading. The price of the business is usually made up of three components:1. Intangible assets.The future earning potential of the business reflective of historical earnings potentially including intellectual property (IP), right to products or services, benefits of a lease, contracts, techniques and procedures as well as goodwill.2. Tangible assets.The fixtures, fittings, plant and equipment used by the business to generate its income. This component is normally calculated according to its depreciated book value.3. Stock. Stock purchased by the business for resale or manufacturing purposes. It is valued at the historical cost price. An allowance may be made for old or obsolete stock.Valuation MethodologiesGenerally, two or more of the following methods are used to appraise the value of a business:1) Industry Ratios2) Asset Based3) Earnings Based4) Market BasedThe appraised value is then subjected to the "sanity test". Some businesses are in a growth industry where their track record is well established and their projections solid. Other businesses may be in what is known as a sunset industry where projections are less optimistic. Many factors affect the true market value of a business, including business sector, economic conditions, business cycles, interest rates, labour availability and a whole host of other influences. Similarly, the value of trademarks, brands, intellectual property and goodwill is not always easy to quantify. Balancing all these factors with the book valuation of businesses establishes the true market value.1. Industry RatiosThe value of the business is based on its sales record compared with industry averages. This method is often used for small businesses and franchises where there is an established track record within a specific industry. It may also use a formula of multiples of weekly sales or an average derived from sales of similar businesses.2. Asset BasedIn businesses where there is history of low earnings or perhaps even losses, the Asset Based approach is generally used. Using this method, the value of the collective assets (both tangible and intangible) will determine the value of the business. In many cases there will be an element of goodwill payable, even where a business is not trading profitably. Although the assets alone may be purchased on the open market, there is often value in purchasing assets as a going concern, which may include customer lists, relationships with suppliers, an assembled workforce, brand awareness and reputation, among others. Calculating intangible assets, including goodwill requires some subjective judgement coupled with experience and the use of market comparisons.3. Earnings BasedGenerally the earnings based approach is used for larger businesses and places emphasis on earnings rather than assets. There are various methods used when employing the Earnings Based approach to appraisals. Return on Investment (ROI) or capitalisation of earnings is common, as is the application of earnings multiples.Earnings Based value is determined by considering:A. The level of return that could be expected by investing in the business in question, taking particular account of the perceived level of risk and realistic costs of management.B. The "industry average" multiplier on true earnings. This multiplier is market driven and varies according to perceived industry risk factors, perceived earnings sustainability and historical comparisons. The multiplier used most often in this approach is EBIT (Earnings before interest and tax) but others are frequently used and it is critical that you are comparing "apples with apples" when discussing multipliers.C. The fair market value of the unencumbered tangible assets of the business e.g. plant, fixtures, fittings, equipment, stock and the tangible and intangible assets which may include intellectual property.EXAMPLE OF ASSETS BASED METHOD A dry-cleaning business has been breaking even and the owners would like to sell and move on. The business has tangible assets with a total book value of $135,000, $5,000 of stock (all saleable), no bad debts and will pay all creditors. The fair market value of the tangible assets has been assessed as $110,000 and intangible assets and goodwill at $15,000. Therefore the fair market value of this business is calculated as follows: $110,000 (tangible assets) %2B $15,000 (intangible assets and goodwill) %2B $5,000 (stock) = $130,000.EXAMPLE OF ROITom's manufacturing company produced an adjusted net profit of $160,000 (EBPITD). The net assets (Valuation of plant and stock) for the business were $240,000 and a fair salary for Tom (owner) is $70,000. If someone was looking to invest in this business they could expect a 25% ROI, as this business offers a low to medium-risk investment opportunity.To calculate the ROI value for Tom's business:Business profits (EBPITD) ...........................$160,000Minus owner's salary ....................................$70,000Profit ............................................................$90,000Return on InvestmentProfit of .........................................................$90,000Divided by desired return ......................................25%Valuation appraisal ...................................... $360,000 4. Market BasedThere will be certain instances where no amount of sound theory or application of complicated methodologies alone will suffice. It is not uncommon that a willing buyer and a willing seller will agree on a value that defies all traditional appraisal methodologies. In other cases the use of traditional appraisal approaches produce unrealistic values that have no bearing on market realities. It is important in any appraisal to overlay relevant market data and multiples achieved in similar businesses "in the real world". Unfortunately the level of information available in Australasia is not as sophisticated as that available in other parts of the world.How will taxes affect your pay out?There are tax issues you may need to consider when selling your business. For instance, if you sell the plant and equipment (or company car) for more than the depreciated book value, you may have to pay back some of the tax you claimed when the items were depreciated (depreciation claw-back). Other tax liabilities may be incurred on the profit of land and buildings if they are included in the sale. It is vital that you fully understand your tax position when selling your business, and professional advice should be sought."Any desktop valuation involves a substantial amount of subjective judgment. The real test of the value of a business enterprise, like any asset, is what a buyer is prepared to pay."

Competent business attorneys are a great addition to your team of advisor's when buying or selling a business.Attorney's can cover your assets and help make a well structured deal, air-tight. When it comes time to draft agreements and close a deal you have to take precautions that you are not leaving any loose ends. You do not want any loopholes left open in your purchase agreements, stock sales, leases, or otherwise have any business liabilities that could come back to haunt you in the future.When looking for a business attorney to help you with the purchase or sale of a business it is a wise choice to use an attorney with acquisitions or corporate transaction experience.Oftentimes a party will have a relationship with the family attorney who does a great job handling matters of taxes, real estate, wills and things of this nature, but will end up winging-it when assisting a buyer or seller of a business. Buying or selling a business requires a specialist.Corporate transaction attorneys will help you with your letter of intent, employment agreements, and non-compete agreements. They will guide you in due diligence by reviewing loans and leases.The buyer's attorney will customarily draft a purchase and sale agreement and take care of the closing procedures for his party.If you're retaining a general practice attorney to handle this for you, you're really just paying for your attorney's education. Just like there are doctors that specialize in all forms of medicine. The vast areas and specialties of law keep any single attorney from being good at all of it.A real estate attorney will seem like a natural choice as well, from the sense of "Closing" a deal, especially in the case where smaller business a real estate broker is representing a party, but you still have to answer the question of competence handling the sale of a business or corporate entity.Use your best judgment.

Missouri