We all know industries experience ups and downs. Factors that might affect whether an industry is hot or cold include; market dynamics, government regulations, new technology, and whether or not an industry is desirable. Ultimately, whether an industry does better or worse from time to time depends on supply and demand.

For example, frozen yogurt was in high demand 5 years ago. Everyone wanted a new store because there was limited supply and the market was demanding new stores. Now there is a frozen yogurt store on every corner – over supply and under demand – which will affect the value of the company and whether the buyer wants to enter the market.

For a buyer, a business in a stable, consistent industry is desirable. Traditional industries such as construction and manufacturing tend to be more consistent and have fewer threats than say the frozen yogurt industry. Ultimately, buyers want to enter markets that have growth potential versus markets decreasing in value or with strong threats that will decrease the value of the industry in the future.

 Selling a business is a complicated manner. If you have additional questions, please contact one of our Colorado business brokers at 720.259.5099 or email us. You can also read more about our seller services at this link.  

When a buyer is looking to buy a business he/she wants his/her culture and beliefs to align with the culture and beliefs of the owner. Buyers look to see themselves in  the owner. 

Why is this important to a buyer? For one, a buyer that can identify with  the owner can visualize him/herself taking over the business. This also makes for an  easier transition. The current employees and vendors of the business will likely be  happier in the transition if the buyer has a similar management style to their current owner.  Ultimately, a business is going to be more attractive to a buyer if the buyer can  visualize an easy transition into ownership.

In our next issue we will explore the next important way a seller can become more attractive to a buyer: industry. Our next issue will be posted on Wednesday. To receive our newsletter with ongoing information for both buyers and sellers of businesses, click here.

 Selling a business is a complicated manner. If you have additional questions, please contact one of our Colorado business brokers at 720.259.5099 or email us. You can also read more about our seller services at this link. 

When business owners are preparing to sell their businesses, there are many ways they can make themselves attractive to buyers. As we represent many current and new business owners in Colorado, we have compiled the top five ways sellers can make themselves attractive to buyers. In Part 3 of our series we will focus on ‘Reputation.’ To read the full series, click here.

A business’s reputation is not only vital to the success of a business, but it also plays a crucial part in the business’s value when it comes time to sell. Despite this, many businesses tend to ignore the importance of reputation and focus more on revenue and growth. In truth, a business’s reputation is a major factor that a buyer evaluates when deciding to purchase a business.

What gives a business an appealing reputation? First, a strong market presence– having a strong market presence will give the buyer confidence that the business being sold is established. A company that has 3+ years of history is evidence to a buyer that the company is stable and has a strong revenue potential. Additionally, a business that is a leader in its industry or niche will command a higher listing price, since it is already very influential in the market.

It is important to recognize that a business’s reputation can fall to the owner of the business. If the owner is the “face” of the business and the business’s reputation is a direct result of the owner, this may cause issues for a buyer. It will make it harder for a buyer to transition the business if the previous owner was a focal point in the reputation for the business.

Lastly, positive online reviews are essential to a good business reputation. Bad reviews or public relations can lead to a decreased listing price and/or repel potential buyers.

All in all, having a strong business reputation is a major factor for buyers. A great reputation will result in increased activity on a listing and a higher listing price.

In our next issue we will explore the next important way a seller can become more attractive to a buyer: culture. Our next issue will be posted on Wednesday. To receive our newsletter with ongoing information for both buyers and sellers of businesses, click here.

Selling a business is a complicated manner. If you have additional questions, please contact one of our Colorado business brokers at 720.259.5099 or email us. You can also read more about our seller services at this link.

When business owners are preparing to sell their businesses, there are many ways they can make themselves attractive to buyers. As we represent many current and new business owners in Colorado, we have compiled the top five ways sellers can make themselves attractive to buyers. In Part 2 of our series we will focus on ‘Organizational Structure.’ To read the full series, click here.

The way a business is structured is a major factor for buyers. In general, business structure is the framework on which the business is run. This can include but isn’t limited to the organizational structure of a business– directors, managers, and the various roles of staff.

A key aspect of business structure as it relates to the sale of a business is how involved the owner is with the customer facing activities such as sales, customer service, or customer retention. For example, if the owner of the company is client facing and directly impacting the majority of the sales of the business, a buyer may believe it will be difficult to continue those sales once the owner is no longer with the company. It is imperative, therefore, that the sales of a company do not rely on an owner solely. This is a huge ‘red flag’ for potential buyers­.

Sellers can remedy this situation by transitioning the owner out of client-facing roles. They can begin to implement and/or hire account managers that will take over this role making the business more attractive to potential buyers.

In summary, it is essential to ensure that a business structure doesn’t rely on an owner. Buyers want to ensure that a business will still be able to maintain its revenue once the owner has transitioned out of the company.

In our next issue we will explore the next important way a seller can become more attractive to a buyer: reputation. Our next issue will be posted on Wednesday. To receive our newsletter with ongoing information for both buyers and sellers of businesses, click here.

Selling a business is a complicated manner. If you have additional questions, please contact one of our Colorado business brokers at 720.259.5099 or email us. You can also read more about our seller services at this link.

When business owners are preparing to sell their businesses, there are many ways they can make themselves attractive to buyers. As we represent many current and new business owners in Colorado, we have compiled the top five ways sellers can make themselves attractive to buyers. In Part 1 of our series we will focus on ‘Cash Flow.’ To read the full series click here.

When business owners are preparing to sell their business, there are many ways they can make themselves attractive to buyers. As we represent many current and new business owners in Colorado, we have compiled the top five ways sellers can make themselves attractive to buyers. In this issue, we will focus on cash flow.

Cash flow is defined by the total ownership package of the business. Professionals may refer to this term as Owner’s Cash Flow or Sellers Discretionary Earnings (SDE)– these terms are often used interchangeably when discussing the sale of a business. Generally speaking, cash flow is comprised of net profit, ideally as claimed in the seller’s tax returns, plus adjusted expenses (salaries, depreciation, etc). A seller identifying their cash flow correctly is key to attracting potential buyers.

Another reason cash flow is so important, is that it helps buyer identify what the return on investment will be for their purchase. The average sale price for a small business (those with cash flow less than $500,000) is between 1x and 3x the cash flow amount. This range can vary depending on factors such as the number of employees, the length of incorporation, industry and the current marketplace. If a seller positions the asking price above this average, there will be little activity on the listing. On the contrary, if a seller positions the asking price on the lower end of the average, he or she can generate lots of activity from interested buyers. All in all, it is essential that the asking price is in correct proportion to the cash flow.

In our next issue we will explore the next important way a seller can become more attractive to a buyer: Organizational Structure. Our next issue will be posted on Wednesday. To receive our newsletter with ongoing information for both buyers and sellers of businesses, click here.

Selling a business is a complicated manner. If you have additional questions, please contact one of our Colorado business brokers at 720.259.5099 or email us. You can also read more about our seller services at this link.

• Part 1: Cash Flow
• Part 2: Organizational Structure
• Part 3: Reputation
• Part 4: Culture
• Part 5: Industry

Exit Strategy Planning for Business Owners
September 24, 11:30 – 1:30 PM
Elway’s Restaurant
2500 E 1st Ave, Cherry Creek
Lunch Provided
More Information
Register Now

Our Exit Strategy Planning seminar is co-hosted with Destiny Capital and Lintzenich Law. We will address how entrepreneurs can exit their business through a variety of ways including selling a business, transferring ownership to employees or family, or liquidation.

How to Franchise Your Business
October 8, 12 – 1:30 PM
240 Saint Paul Street, Suite 102
Lunch Provided
More Information
Register Now

Our Franchise Development seminar will discuss the legal, management, and sales aspect of the franchise industry. We will address such things as the FDD, royalty structures, and how to sell new franchises.

So far in 2014 we have seen an 18% increase in the first quarter and 11% increase in the second quarter, from the same time period reported last year. “It is an exciting time in the market, like we are seeing multiple industries thrive in Denver, the business market is no different,” says owner Al Fialkovich, “we expect the market to finish strong in 2014 and continue to increase into next year.”

Financial Performance Indicators

Also increasing is the financial performance of businesses for sale in Colorado and the nation. Both median cash flow and median gross revenue increased at 8% and 1.6% respectively, year over year. Median cash flow for listed businesses now sits at $100,000 and median revenue at $400,060. However, the ratio between asking price and sold price remains fairly steady.

Revenue multiples increased 8% from 0.58 to 0.63, while cash flow multiples have remained stagnant at 2.23 in the national market. Currently, the average cash flow multiple in our sold Colorado businesses is slightly higher at 2.28.

Future Outlook

We continue to anticipate a strong market through the end of 2014 and into 2015. We are still very much in a demand market, however the low multiples that continue after the recession are providing an excellent purchase value for buyers. We may see this situation reverse and multiple increase as buyers compete over the lower supply, however with the possible tsunami of sellers in the baby boomer demographic the market may not have time to work through this before the supply drastically increases.

Transworld Business Advisors of Denver is a team of Denver business brokers that helps visionary entrepreneurs buy a business, sell a business, or grow a business through franchising. If you are interested in having a conversation about what your business is worth, or how to sell your business you can contact us via email or phone at 720-259-5099.

*Market data and charts provided by Bizbuysell.com. 

Almost 90% of business owners have never sold a business before. So if you are beginning your research on how to sell your business, and haven’t got a clue where to start, you are not alone. One of the many terms thrown around in discussions of a business acquisition or sale is seller financing. A term that almost immediately solicits a negative reaction from most sellers, it is not one that should be feared, but should be learned and understood as a tool to help sell your business.

What does this mean for sellers?

Right now we are experiencing a seller’s market. There are many more qualified buyers searching for good business opportunities than good businesses available for sale. Over the next three years that will slowly start to flip, until we have a strong buyer’s market where many business owners will be competing for deal dollars. From a basic economic standpoint this means two things for business owners planning on selling in that market: 1. Sale prices will go down 2. Competition will increase and it will be harder to sell your business.

What does this mean for buyers? 

If you are in a position to buy a business or add-on an acquisition opportunity to your current operations, this time could be incredible for you. Buyers may be able to expand their business operations and overall value during this time through savvy acquisitions.

So what should I do?

If you own a business and you are thinking about selling in the next three to five years, don’t wait. Yes, it is true that you can price any company right and it will sell, in any market condition. However, if you want to avoid the unknowns of the potential decreases in valuation put your business on the market now. Just because you sell your business, does not mean you have to exit your business. You can construct employment or contract agreements that keep you involved and working for years after the sale. At the very least have a conversation with a professional advisor like a business broker, business attorney, or financial planner and begin planning today.

The Seller Tsunami is not something to fear, but simply something to plan for. The baby boomer generation will affect business sales. If you are worried about how the baby boomer generation will change your business value, start planning now. 

Transworld Business Advisors of Denver is a team of Denver business brokers that helps visionary entrepreneurs buy a business, sell a business, or grow a business through franchising. If you are interested in having a conversation about what your business is worth, or how to sell your business you can contact us via email or phone at 720-259-5099.