Every business proprietor is approached from time to time by would-be buyers who express interest in buying their company. How you handle those early conversations can make a huge difference in the likelihood of a successful and profitable sale. Today Even if you are not interested in selling, these early queries can offer you with valuable information about the marketplace, who the active customers are, and what drives the worthiness of your business, who people understand as your rivals. All of this information will be very helpful when you do decide it’s time to sell.
First of all, realize that approximately 85% of the techniques you can find from potential buyers will in reality be approaches from intermediaries who may or may not have a genuine buyer who might acquire you. The old I have a buyer for your company is one strategy less advanced intermediaries use to begin a dialog with a prospective seller.
Begin the conversation by clarifying that you expect the conversation to be completely private. Next, get out your pencil, ask questions, and take down notes. Listed below are six important questions to ask anyone who telephone calls expressing interest in your company. 1. Ask them directly – Are they an intermediary and if so do they have they been engaged by an exclusive equity finance or a proper corporate buyer that has expressed fascination with your business?
2. Tell me about the customer, what do they actually, how large are they, where are they centered? 3. Why does the buyer think your organization may be considered a good acquisition? 4. If the customer is a private equity finance, ask what size companies do they focus on? What companies do they own that act like yours and exactly how have those companies performed?
- You cannot borrow against the asset
- Create the business plan for your branch
- A fixed rate
- Claim holders: Cash flows are to equity (firm) and discount rate is cost of equity (capital)
- Value-Added: Are We Doing the Right Things
- I= Total Investment Amount
- Other needs since a nonprofit cannot issue shares of stock
5. Regardless of the type of buyer, ask what degree of profits (pretax earnings as a share of sales) do they find attractive? What development rate do they consider desired? 6. And the most important question, just how do they typically value their acquisition focuses on? Most buyers have a pre-set formula they use to price acquisitions.
Its usually based on a multiple of pretax cash flow the prospective company generates. Asking this question can help you learn of a range of possible ideals they may set and provide you with valuable information about the potential value of your business. Active buyers will often let you know that they fully value a small business signifying they pay perhaps a 67 multiple of free cash flow. Buyers who start off by saying that they don’t pay the most will most likely not be intense in pricing, but may be very good buyer for other reasons, i.e. they pay cash at shutting.