The following are the most frequently asked questions we get asked by our current or potential clients.
- What kind of business would be right for me?
- This is a personal decision. What are your interests, hobbies, and passions? What are your strengths? Are you bored with what you have done in the past and need to do something different?
- Is the business finance-able?
- Banks are very interested in financing business acquisitions. If the business shows consistent earnings and has a positive cash flow, a bank will most likely finance the transaction. However, a buyer may need to talk to three or four SBA lenders to find the right deal.
- What are growth opportunities in this business?
- Many times, a buyer will recognize opportunities that the seller does not, or the seller recognizes opportunities but just can’t put the time and effort into it. Sellers are a good resource for recognizing trends and opportunities.
- What does “cash flow” mean?
- Cash flow is also known as seller discretionary earnings (SDE) and net discretionary earnings. This is the company profit, plus owner salary, plus depreciation/amortization, plus interest expense, discretionary spending items like entertainment, one-time legal fees and others.
- What is EBITDA?
- EBITDA is a term used more often in medium to large businesses. EBITDA means net Earnings-Before-Interest-Taxes-Depreciation-Amortization. This does not include an owner’s salary and discretionary items.
- Whether its cash flow or EBITDA, these numbers are typically the focus of debate and negotiation.
- Why is the owner trying to sell the business?
- There are many legitimate reasons why a successful business owner needs to sell. There are health issues, a spouse may have found a job in another city, kids require more time at home, burn-out, retirement, and more.
- Will key employees stay with the business?
- There is no reason for employees to leave unless the buyer wants to make a change. Buyers need to know if there are any key relationships or family relationships involved. Typically, sellers won’t have disclosed to employees that the business is for sale.
- Is seller financing available:
- Many times, the seller will finance part of the transaction. The cleaner the financial statements and the stronger the business, the less likely the seller will finance part of the sale for the buyer. It certainly does not hurt to ask.