We get asked these questions all the time.

How is the value of my business determined?

Several factors are involved in determining valuation. In a preliminary discussion with your intermediary, it is helpful to understand your business trends the past few years and its prospects for the future – has your business seen consistent top-line growth, has it been affected by a tough economy, what assets will convey with the sale, is your company growing, etc.

Ultimately, the value of the business is determined by what the market will pay. The market treats business types and industries differently - a blue collar construction company will be valued differently than an online wholesale distributor. Additionally, a financial buyer will ascertain one value, while a strategic buyer another. For this reason, we suggest a valuation range in our engagement, and in many cases don’t offer an asking price to the market so as to not leave money on the table for the right strategic buyer.

What is the difference between an asset sale and a stock sale?

In an asset sale, the company transfers the assets of the business to the buyer. These assets may include inventory, equipment, real estate, goodwill, copyrights, patents, leases, customer lists, etc.

In a stock sale, the company transfers shares of company stock to the buyer. In some cases it is more appropriate to consummate a stock sale as it is more advantageous for tax reasons, the transfer of key contracts, licenses or other considerations.

Why should I use an intermediary?

There is a lot of time, professional skill and nuance involved in finding the right buyer for your business. Oftentimes, owners who try to sell their own business get side tracked with the process and forget to “work in their business”. The result is a hiccup in performance which then scares the buyer or their lender from moving forward with your transaction. Get help and protect your interests by letting someone else negotiate and work on your behalf while you focus on maintaining your performance.

Also, business intermediaries have extensive databases of qualified financial and strategic buyers. Many times owners end up selling for a lower asking price because they don’t have access to multiple qualified buyers who are interested in bidding up the value of their company.

What happens when someone is interested in my business?

BAMA adheres to the following process when there is a buyer interested in one of our seller engagements:

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How long does it take to sell a business?

On average, it takes 6-9 months to sell a business with BAMA. This timeline is just an estimate - some businesses take longer to sell, others close more quickly. There are several keys to ensure a timely, successful transaction:

A willing seller –
The seller must be ready to sell. Many sellers think they are ready to sell, but when the time comes to sign a Letter of Intent or Purchase Contract, they have second thoughts. A willing seller has thought through the process and is ready to sell for a specific price.

A qualified buyer –
There are a lot of tire kickers in the market. A buyer who is qualified both financially and experientially will ensure that time isn’t wasted on a transaction that won’t be consummated. Additionally, the lending environment has changed for the foreseeable future. This means buyers must have access to sufficient capital to get your transaction done. You may need to support premium valuations or those with limited assets and significant goodwill will seller financing.

An accurate valuation –
It is important the seller agrees to a valuation that is supported by the market. If the seller believes their business is worth a 5x multiple, but the market is only willing to pay a 3x-4x multiple, then your business will likely not sell. The market is smart and efficient. Money goes where it will be treated well and generate appropriate returns for the risks and market factors of a specific business.

Why should I use BAMA?

Business Acquisition and Merger Associates uses its proprietary, multi-faceted marketing program and professional skill to complete successful business transfers. If you’ve decided it’s time to sell your business, let our investment banking process and large database of qualified buyers bring you multiple offers in a tight timeframe.

If you’re looking for a specific company, let’s discuss your acquisition model and we’ll show you how a buy-side engagement will return the results you’re after. Our proven processes have resulted in many satisfied buyers and sellers.

Do I need to provide seller financing?

Chances of selling your business increase dramatically if seller financing is offered. It widens the pool of buyers and proves you are confident in your business, which often helps lenders and buyers get over the hump when valuations are on the higher end of market.

Offering seller financing shows you believe your company is worth the asking price. You aren’t going to offer financing if you don’t believe the buyer will be able to make your payments.

Acceptable seller financing terms result in a selling prices that is, on average, 16% higher than all cash offers. Additionally, when seller financing is offered, sellers get the added benefit of interest payments which are over and above the asking price and usually more than the seller can get from their own financial institution for the same money.

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