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Reliable Financial Data Is A Driver Of Business Value
The lack of financial integrity is one of the most common hurdles encountered during the process of selling a small business. What is being bought or sold is primarily a future stream of income. Not the assets or property of the business, but the income these assets will generate in the future. Since future income is impossible to definitively compute and hard to estimate, the company's financial history, at least, provides concrete facts and insight to future performance.
So, reliable financial records are not only a critical element of business management but also support the business' historic profitability, operational efficiency, and its solvency. Most importantly, however, reliable financial data is the impetus for two critical events to occur in successful small business acquisitions: - the ability for a prospective buyer to forecast the future probability of growth and prosperity of the company
- the likelihood that a bank will provide financing for the acquisition
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Veneto Collection
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| | Pictured left to right: Marcia Bowron (CBB Broker), Huleh Simonians & Vanoohi Ohanian (Sellers), Misi Okedokun |
This elegant Women's special-occasion, designer clothing boutique, located in the Houston Galleria Uptown Park Shopping Center, has been serving the Greater Houston Area since 1997. The Ohanian sisters were ready to retire. The buyer, Okedokun, who owns a chain of home care companies, had been looking for additional business investments for almost a year. This business was sold within 10 months of going to market.
Marcia Bowron listed and sold the business.
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Houston CPA Society Convention
Peggy Tate, as a broker and representative of Certified Business Brokers (CBB), was a guest speaker at the June 2015 annual "CPE by the Sea Conference" at the Galveston Island Convention Center that was jointly sponsored by the Texas Society of CPAs and Houston CPA Society.
Peggy gave a presentation course on "Small Business M&A: Assisting Your Clients with Their Exit and Growth Strategies." The audience was very interested in this subject and engaged in the discussion. There were approximately 100 attendees.
This annual meeting is one of the most popular for the CPA Society.
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Ask The Experts
Question:
Answer:
Three Reasons To Sell Your Business Now
To those of us who work with business owners interested in selling their business at the optimum time, it's quite clear the time is now. In fact, many believe a perfect storm is brewing which will drastically affect the amount of cash a business owner ultimately receives following the sale of their business.
Before we explore the situation creating the urgency to exit a business now, it's wise to review the three factors which have the greatest impact on the sale price of a business other than the targeted buyer.
The first factor is the business's cash flow. It's often defined as SDE (Seller's Discretionary Earnings) for Main Street businesses and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for Middle Market businesses. Clearly, these measurements of income are something over which the business owner has some control. At least in theory, the business owner can work to improve this important factor given sufficient time.
The two other important factors include the industry's favor and the Merger & Acquisition climate-both of which will change over time. And neither of these are under the business owner's control.
Unfortunately, when you ask most business owners about their time horizon to exit their business, they respond by saying they will sell their business when it suits their personal needs. In fact, according to a recent survey by Citizens Commercial Bank of more than 450 middle market business owners and decision makers, supplemented by a series of in-depth interviews, "nearly 70 percent of business owners say their expected retirement date will significantly impact when they decide to sell their company."
While on the surface using the business owner's expected retirement date to initiate the sale of a business seems logical, the reality is this single-minded approach does not consider industry favor and/or the M&A climate and likely will translate into less cash for the business owner.
As an observer of the M&A climate today, it's clear to me that there may not be a better time to sell your business for quite some time. And here's why.
Read The Entire Article on Forbes
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Texas Economic News
