Buy A Business Worth At Least A Million Dollars And You’ll Never Have To Deal With Crooked Sellers

I am always railing on and on about why people should buy businesses worth at least a million dollars or more. That are big, with lots of cash flow and with a management team already in place who know what they are doing — so you can just sort of step in and let things go “as is” and not have to think about it.

However, besides all the financial reasons, there is another — very powerful — reason to only go after large businesses like this. A reason almost nobody ever talks about and yet, is probably a more important reason than any other.

And that reason is, quite simply, people who own large businesses, that have good numbers, and that can prove their business is what it is, are almost always straight-shooters and not crooks.

It’s true. I have been doing this for over 50 years and I can tell you right now, the chance of you running into a person that has a business making a million a year that doesn’t have a good word or isn’t a good person…is almost zero percent. There may be exceptions to this, but I have never, in all these years, run into one that wasn’t a man of his word and didn’t genuinely want the deal to go down fairly, squarely and exactly as we agreed to.

Does this mean they are all going to be your best friend?

No. In fact, I have run into one that I haven’t gotten along with. But at this level, where there’s a lot of money at stake, they’re basically all nice people. They’re easy to get along with. And keep in mind, one of the main reasons they are so nice and friendly is because they know you have cash. When you pay cash (using investor financing) you do all the talking. You’re the one who is really in control, and they know it.

How Much Is My Business Worth – Is This The Right Question To Ask?

One of the most frequent questions that I get from business owners is: “How much is my business worth?” Before we can answer that question there are other things that we must answer and do before we can get a complete and accurate answer.

First things first: If you have a desire to attract the most compatible, ready, willing and financially able business buyer, you must first present your business in the best possible light.

A few questions that you should ask first are:

Do I have a business that has been profitable for at the least 3 years?

Do I have verifiable tax returns and financial statements to show proof?

Anyone can start a business but it takes a very smart and capable person to turn it into a profitable business. As the owner of a business, can you be honest with yourself and say with 100% certainty, that you’ve been a successful and efficient business owner?

Another consideration and question to ask is: Have a prepared for the sale of my business by putting a stellar exit plan in place to provide for a orderly sale and transition?

If you own a business and you’ve not put your exit plan in plan, you’re causing a considerable decrease in value. If you attract a buyer that is ready, willing and ready to do things on your terms and your transition plan is chaotic, expect the buyer to want a discount on the finally selling price as a result of having to smooth out the “rough edges”.

Have you discussed in complete detail with your family about your desire to sell the business? Not doing so can cause headaches during to sell process and many business owners end up caving into the demands of their families and often times hinders the sale of the business.

You may be thinking “how do any of the above effect how much my business is worth”. The answer to that is– preparation. Preparation is going to answer the question: How much is my business worth.

Ideally you should start the process of getting your business prepared for sale about 2 years prior to putting it on the market for sale. The preparation that is involved will greatly affect how much your business is worth.

Many business owners do not take these things into consideration when they decide to sell their business and are extremely disappointed when the official appraisal is provided and the numbers don’t live up to their high expectations.

Every business owner has the right to believe their business is worth a certain amount but the reality is, did you prepare? Be honest with yourself.

If you did not prepare you could be in for a disappointment in the event that you need to sell immediately.

Before asking “How much is my business worth?”, read the above, let it sink in and if you’re in need of any help get in touch and I am sure I can help you put a plan in action.

How Much is Your Business Worth? Value It With a Business Valuation Calculator

Valuation Potential

There are more than 10 ways to value your business. Each method will provide you with a slightly different answer. One of the more common methods that business brokers use is to value your business is based on how much cash the business will generate in the long term. Business brokers then discount this cash to today’s value. This allows Business brokers to gain a clear understanding of the value of the business in today’s value.

With online calculators assumptions need to be made in order to generate a valuation figure. Given the value of your business profit, we then need to understand how much actual cash you have available in the business. Probably the largest player to impact upon this level of cash is the tax man. The tax man unfortunately wants a significant slice of your profits. When your business therefore earns a profit of $100,000 you effectively only end up with a lesser amount in the bank, as cash after you have paid your tax bill.

The other major assumption that needs to be made, is what we call the “weighted cost of capital”. This might be more simply referred to as the risk of lending money to the business. If your business is a low risk proposition and your future income is guaranteed then this figure would be down at around 4%. However for most small businesses there is a high degree of risk that earnings will remain constant over the next 10 years, so we apply a risk factor of 15-20% or even greater for higher risk enterprises.

With online business valuation calculator, the model calculates your sales and profits over the next 10 years and then discounts this by the “weighted cost of capital” rate.

There are many more factors that could be taken into account including capital injections and expenditures, depreciation and even whether the owners of the business are being paid a fair salary.

Online Business Valuation calcutors can provide an indicative valuation of a business by using discounted cash flow and weighted cost of capital.