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This media supply company has been supplying businesses, schools, churches and other organizations with high quality audio/video media and equipment for 26 years. The former owner, Deborah Procell, was ready for full retirement. She was already semi-retired for a few years and had her manager and fully-trained staff running the business. A below-market office space lease in a well-located business park was in place for a good number of years ahead, providing for low overhead. The new owner, Bunmi Adebajo, having 22 years of experience in corporate banking and having been looking for a business to purchase since 2009, was well-prepared with her 401K funds to acquire CAVS. She plans to work full-time in the business and keep the entire staff with the goal of expanding the operation.
Ryan DeGennaro listed the business and sold it. |
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Add Value to Your Business with Systems and Brand
Takeaway: Understand the importance of documented systems that allow owners to remove themselves from the business.
A business valuation is not about what a company is worth in the current owner's hands, it's about the company's transferable value. It's about the probability that the business will sustain its profitability and continue to grow with a new owner at the helm. Therefore, the factors that contribute to the company's stability and consistency will be examined by prospective buyers to determine the risks associated with taking over the business.
A strong brand, which is an intangible asset and an element of goodwill, is a desirable attribute to have in the business-for-sale marketplace. Documented systems also contributes to saleability. Both make the list of the top ten value drivers that increase the sale price of a business.
System Driven Vs. Founder Driven
If you are a small business owner, it would be worth your while to have a game plan for how you would package your business for sale. Depending on the size of your firm you may need a few things in place in order to sell the company. The first and probably the most important thing you need to do is describe how a new owner would be able to replace you, the current owner. Most potential buyers would be averse to purchasing a business if the owner's shoes are too big to fill or if the owner's hands would be too difficult to unravel from the operation. An enterprise with infrastructure guiding its revenue-generating capacity is much more appealing than one with a singular person holding the key to the revenue engine.
Therefore, documenting how the business runs and how you do what you do is a key factor in getting your business sold for the best price possible. As the E-myth explains, the owner should be free to work "On" the business instead of "In" the business. So, documenting how the business runs without over-involvement by the owner is important.
Systems and Procedures...
Staff, Sales and Marketing Systems...
The Importance of Brand...
See Full Article for a complete discussion on these topics
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Ask the Experts
Question: What matters most to buyers who are looking for a business to purchase?
Answer: Since approximately 70% of all buyers are first time buyers, often displaced corporate employees who will be owner /operators replacing a job and looking for financial independence, it is not too difficult to understand their mindset.
Here's a list of what buyers are looking for in businesses for sale:
- An owner that is not too difficult to replace - Buyers are risk averse and don't want the business to be too dependent on the current owner
- Buyers look for ways to enhance the business, is there an "upside." They generally want to grow the business and do better than the previous owner
- Proven verifiable books and records, tax returns
- A price that makes sense
- Leverage and terms - they want to use bank financing or owner financing
- Solid, verifiable cash flow
- Furniture fixtures and equipment properly valued and in good condition
- Positive appearance of facility, good reputation
- Favorable lease and lease options
- Training, transition period with the seller
- Covenant not to compete, non solicitation agreement
- Solid reason why the owner wants to sell
- Experienced employees who will stay on
- No last minute surprises
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