Choose one of the frequently asked questions below to learn more about the buying and selling of companies.
Questions about sales
From our experience, all companies are sellable if they are priced correctly and offered to a sufficient number of people in the appropriate sectors, even if the company suffers a loss.
It is highly recommended that you have a comprehensive market report and appraisal before offering your company for sale. This will help identify areas where failure to review may cause material losses, unnecessary delays, or interruptions to the sale process.
According to the well-known rule of thumb, “the more the buyer is willing to pay the price, the seller is willing to sell”, in fact it is worth! A continuous and comprehensive marketing campaign creates a competitive environment, but despite this, many factors determine the value of the company such as: liquidity, continuous profits, property value, financial history, location, competition, customer base, industry standards, existing management and the economy.
Evaluating a particular company is not an established science. Doing so accurately and thoroughly requires experience, knowledge of the industry and the ability to analyze and test all influencing factors.
The value of a company is determined by several factors including: growth potential, financial liquidity and potential inflationary situations, sector trends and activity, continuous profit and property value, financial history, location, competition, customer base, industry standards, existing management, and the economy.
- Profit maximization – used for companies with constant profit.
- Discounted Cash Flow – used for cash-generating businesses.
- Property value – used for companies that have a tangible asset base and as large as a plant.
- Entry Cost Method – A comparison is made between entry cost and firm’s value
- Industry precedent – Some industries have their own unique approach to evaluation and are based on sector standards.
It depends on market conditions and what is in it for sale. In the normal situation, selling a company takes from 5 to 8 months from start to finish. A full year might be a good time to put into your accounts, and we communicate with the final buyer for the first six to eight weeks.
Questions about purchases
This varies according to the seller, some are willing to finance a part, but most refrain from that, and the terms and duration of the financing also differ. However, most transactions under $ 5 million rely on an SBA loan to help buy the company. This loan is backed by the government and offers competitive rates. You can think of it as a mortgage when buying a home. Most people make an initial down payment and then mortgage the remainder of the total cost.
Many small businesses fail in their first year or two of incorporation, so purchasing an already existing company reduces the risk of corporate losses. Existing companies have a proven track record and established business model, a customer base, trained and expert staff, and most importantly, the cash available for the new manager. The risk is lower and growth often accelerates with these pillars in place, the new manager, his ideas, and his renewable energy.
Also, in the first month you will be supported by a cash flow and you will get an income unlike most companies which takes time to be able to generate a little income.
This may be difficult because we have learned over the years that everyone’s definition of these terms varies slightly. Generally speaking, profit is the money left over after accounting for all expenses, and cash flow is the total that is transferred to and from the company. Profit is not only represented by cash flow but also there are other owners’ benefits, interest payments, interest collected, depreciation, installment … etc
These items show how much the company produces that may differ from profit from normal operations. Discretionary profits are the owner’s benefits. EBITDA is all expenses that do not apply to the new owner. For example, the owner may have an office that is more expensive than you want to own or he may rent a car that you do not plan to use or other expenses that are not your responsibility when buying the company, but this definition can differ from person to person.
Many opinion polls were conducted to answer this question, most of which resulted in the same answers and the same order of priorities. Below we will show you the most important reasons in order of importance:
1- To do my own thing, and to control my destiny.
2. I don’t want to work for someone else.
3. Better use of my abilities.
4. Material profit.