The Advantages of Self-Educating Whether Buying or Selling
By JoAnn Lombardi, President ofVR Business Sales/Mergers & Acquisitions
As A Prospective Buyer
When you decide to look for an existing business, you have to find one with the potential to grow. By acquiring an ongoing concern, you have the opportunity to increase your profits and; therefore, increase the value of what you have bought. Most business owners will be willing to train you in the daily operations of the business. This will increase your chances of long-term success over starting a business from scratch.
How VR Business Sales Can Help
In order to pursue your dream of owning a business, you need to understand the process involved in buying one. Our VR Business Intermediaries can assist you to help to obtain a complete understanding of the process. Here at VR Business Sales, we will match you with a business per your interests, needs, and goals. We will find the business for sale within your selected price range. We assist you in every aspect of the purchasing process – gross sales, rent, terms of purchase, etc. Your VR Intermediary will arrange a meeting between you and the Seller to discuss how the business operates.
Negotiating an Offer
If you like the business, the next step involves writing and presenting the offer by your VR Business Intermediary. This will be the stage your VR Business Intermediary will share your background information and pertinent financial history with the Seller – your industry experience and how you arrived at the offering price, terms, and conditions. The Seller will either accept the offer or submit a counteroffer to the VR Business Intermediary to present to you. Once you’ve agreed to terms with the Seller, you will be allowed to inspect the financial records of the business to determine if everything is in order. If all of your questions have been answered per the contingencies in the offer, you can close the deal.
Agreeing on the Leasing Terms
The most time-consuming part of buying a business is assembling the lease assignment due to third-party involvement – the landlord. You, your VR Business Intermediary, and the Seller will work with the landlord to arrange an assignment of the current lease or create a new lease with new terms.
Once this happens, you will have to provide all the necessary paperwork to the closing agent or attorney. The closing agent or attorney will run a lien search thereafter. If everything is in order, any notes or equipment leases with be assigned to you or paid off. Lastly, arrangements are made for you and the Seller to count and price the inventory. When this is completed, documents are signed and the deal is closed.
Deciding to Sell Your Business
How successful you are as a business owner always depends on how smart you are from the day you sign the closing papers to becoming the owner. You go from the position of the buyer to seller instantly, and you’re mindset has to change just as quickly. Whether you plan on selling the business in one year, ten years, or never; strategies to maximize your business’ value are simply good management practices. They should begin well before you ever decide to sell.
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Compromising and Countering: VR Shows How to Negotiate a Business Sale
By Peter C. King, CEO of VR Business Sales/Mergers & Acquisitions
If you’ve never purchased a business before, negotiating is one of the most challenging aspects of the transaction. What can happen in many cases is that the buyer will spend more for the business than originally intended and the seller receives less than planned.
When you first consult with VR Business Sales, we will instruct you on how the negotiation process works, what to expect from the other party, and how you can be most effective. With our decades of experience and innovative tools at our disposal, we will ensure that you will be informed and well-versed in how to negotiate.
The Three Ways to Deal
In business sales, there are generally three ways to negotiate the sale of a business:
- First Offer is Final – You make one offer that is your first, best, and only offer, regardless of what the seller’s price and terms are.
- Splitting the Difference – This is when you and the seller split the difference between your asking price and theirs.
- This for That – An important element is determining what the seller wants non-monetarily in the transaction such as contracts of key employees, goodwill, intellectual property, etc. Work with them to see what they’re seeking to keep, and use it in the negotiation to get closer to your asking price.
Determining the Value
In most cases, the seller is going to have better information on the business than the buyer as well as more in-depth industry knowledge. VR will assist you in preparing the business for sale, where all the information regarding the business is compiled and organized. You will have all the necessary facts and figures when examining the business as well as the industry so that you will gain a better understanding to go into negotiations.
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Keeping an Open Mind
byShawn Hyde, CBA, CVA, CMEA, BCA, ECA, Canyon Valuations, LLC
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There are a LOT of different types of businesses out there, each with different characteristics that affect how they can be appraised.
As business appraisers, we run into businesses with poor financials, detailed financials, businesses that operate in multiple industry codes, businesses that are very profitable, and others that are losing money every year. We see businesses that hold excess assets, and some that only hold assets and never generate a dollar of income. There are businesses that operate as non-profits, C-corporations, S-corporations, sole proprietors, Limited Liability entities, or partnerships, and some that have never filed a tax return.
We could be asked to appraise any of these businesses for a wide variety of purposes ranging from a 100% controlling interest to any size of a non-controlling ownership interest. There could be a partner dispute, or maybe a partner wants to buy in. We could be appraising the equity position or an invested capital interest in a business. We could be asked to appraise a 100% interest in the assets that typically transfer in a sale or we could be asked to appraise a non-controlling equity interest in a holding company.
All of these factors can have an effect on how we reach our value conclusions.
Real estate appraisers, machinery, and equipment appraisers, all tend to use the same appraisal techniques over and over. In fact, many of those appraisers even refer to their methods as ‘approaches’, saying things like, “I performed a cost approach to arrive at my conclusion of value.” In business appraisal, we have multiple methods available to us under each of the asset, income and market approaches of appraisal theory. And, there are quite a few ways we can modify most of those methods in different ways to accommodate the particular aspects of the subject assignment. For example, under our market approach, we have the option to consider either publicly traded comparables or privately held comparables. We can look at a price-to-revenue multiple, or a price to EBITDA or some other income stream multiple. We can even consider prior transactions in the subject company that we are appraising. We can use these methods to appraise an ownership interest in the business’ assets or an equity position with just a few adjustments.
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Is Collision Repair the Gold Rush 2.0?
I recently had a friend in the collision industry describe today’s collision repair marketplace as a Gold Rush. I think that is a brilliant analogy—leaving aside the mid-1800s California Gold Rush's famous lack of gold.
Make no mistake: this Gold Rush in collision repair has plenty of treasure, but you’ll have to be aggressive in getting your share. Smart, institutional money continues to pour into the industry, furthering the trend of consolidation at a rapid pace. New, well-financed entrants to the marketplace are popping up seemingly every day, each with a slightly different spin on their visions.
One thing that is evolving, however, is the investment required to be a player in the future of collision repair. As automotive technology evolves, equipment and training requirements for collision repairers are increasing at a rapid pace. The days of the “mom-and-pop” collision repair shops are dwindling. The multi-shop operators (MSOs), both national and regional, have discovered the magic of scale that smaller operations just won’t be able to achieve. While the mom-and-pop collision centers are declining in number and the MSOs continue to flourish, where is the biggest opportunity for those less funded?
In the immediate collision arena, it seems that specialists—specifically, specialists who operate within particularly profitable niches—are set up for success in the short, mid, and long term. Collision repair providers within the heavy-duty trucking, agricultural equipment, and exotic vehicle spaces, for example, seem to represent an opportunity for unusually high-profit margins and long-term sustainability. While these businesses typically differ from the profile of those sought after by the current consolidators, their profit potential opens the investor pool significantly. In particularly profitable cases, even one-store niche operations could be of interest to private equity and other investors. One must wonder when consolidation within that world will begin on a larger scale and who will be the ones to take advantage. The niche collision world is one space I’m keeping a close watch over.
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Well Established Lubricants and Additives Manufacturer and Distributor For Sale in Miami, FL
Amazing and Unique Opportunity to acquire a very successful South Florida automotive oil producer and distributor with high-quality standards in motor oils and additives. This Company has years of experience in blending all types of motor oils, ATFs, and a great variety of lubricants manufactured 100% in the United States with the highest quality found on the market.
A highly trained team of managers, assistant managers, and employees are dedicated to the development of new products and markets. Their own laboratory is equipped with the latest technology to guarantee quality and consistency in products dedicated to heavy-duty, gasoline engines, transmission fluids, and other new products. New projects such as selling anti-freeze packaging and DEF products to customers and wholesalers will bring additional revenue and is totally in accordance with the worldwide mission of Saving our Planet!
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VR Office in San Antonio, TX Sold a Successful HVAC Company in Oklahoma for $3,500,000
This is a well-established and highly profitable heating and air conditioning business located in Northern Oklahoma was available to a qualified buyer. The business was an established fixture in the marketplace for decades.
The Business provided services to both residential and commercial customers. On the commercial side, the company operates across multiple states and has a great team of bonded contractors to execute their projects. The company had a strong pipeline of work and was careful to only commit to projects that they can provide excellent service.
When the single-family housing market wanes, the multi-family housing market keeps expanding. This company was very strong in the apartment industry enjoying long-term relations with large multi-housing builders.
The business can be relocated to a more visible and higher concentration of people to increase its service sales.
Congratulations to John Small for your successful closing.
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Thinking of selling your business or looking for an established
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The Year Of Slow Starts In Europe
ByGundo Kahle | CEO, CBA Cross Border Associates Ltd. & Co. KG
What's next for M&A and related services? It is always exciting to look ahead and see what the future holds. The world is just recovering from the pandemic and the economic shock that came with it, as well as the impact of the war in Ukraine. In the world of mergers and acquisitions and corporate finance, 2023 is a year of slow starts, but at some point, there has to be growth, change, and opportunity, historical retrospectives show.
The key trends and developments to watch out for this year are increased M&A activity: it can't get any lower than it is now. One of the key trends to watch out for in 2023 is the increase in mergers and acquisitions (M&A), especially in the technology and healthcare sectors. As many companies have large amounts of cash, mergers, and acquisitions are a way for them to deploy this money and achieve growth through consolidation. In the technology sector, we expect continued consolidation and focus on areas such as cloud computing, software, and cyber security. In the healthcare sector, we can expect increased M&A activity as companies seek to expand their offerings and enter new markets. The hospitality sector is also performing well in markets that are no longer suffering from pandemic strains and are not affected by warfare and natural disasters.
Unfortunately, however, there is a lack of investors in the early stages of all healthcare offerings, be it services, equipment, or devices. This is something that needs attention in the market.
Increasing ESG investment is another trend to keep an eye on in 2023. The continued focus is on an increase in ESG (Environmental, Social, and Governance) investing. As more investors become aware of the importance of sustainability and corporate responsibility, they are looking for investments that align with their values in this area. This shift is driven not only by a desire to do good but also by a growing realization that ESG investing can also benefit businesses. Companies with strong ESG profiles are often seen as better managed and therefore more likely to generate long-term returns for investors.
Conclusion: 2023 will be an exciting year in the world of corporate finance, with a number of trends and developments to watch. Whether it's mergers and acquisitions, ESG investing, interest rates, alternative lending, or financial reporting and governance, there are many opportunities for companies and investors to grow and succeed.
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VR is The Only Remaining Founding Firm of The International Business Brokers Association ("IBBA").
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Have You Ever Considered Selling Businesses?
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