Team Sage Blog

What you need to know when buying or selling a business

Coffee with Jody - Episode #7

Transcript:
So today I’d like to speak with you about buying businesses, and when is your business ready to be sold. I just had lunch with somebody who’s an entrepreneur and was looking to buy a business.

He evaluated and analyzed 10 different businesses within a particular industry, promotional products. The business originally wanted to be purchased for over $700,000.

Looking at the business, what’s working about the business, where things are off about the business, they found that the revenues were down, even though the profits were up, their revenues were down, and that they were vulnerable inside of having three big clients: which, you lose one big impact on the business. So he was able to bring them down to somewhere around $500,000.

From the coach’s perspective on coaching you in your business, if you want to sell your business, we want the highest multiple. We want to be able to get that 700 rather than have somebody be able to navigate in the negotiations down to that five.

And so, what needs to be in place? Most business owners think that their business is worth a lot more than it is. Ultimately, it’s only worth what someone will buy it for.

So, going in and making sure that out of ActionCOACH‘s six steps, that at least the first three steps are in place. That’s mastery – which looks at your product profitability, the predictability and consistency of your products delivery and the systemization of the company – and then you look at making sure your marketing is in place and that you know your acquisition cost and and are able to grow revenues and then we go in and look at systems.

If you go all the way through and create a business that’s running smoothly without you, it’s sellable, but, it may not have the growth potential that most people who are buying a business are looking for. So, we want to have at least the first three in place, so that they can come in and actually grow it as well.

I think its important to be very clear about what your goals are with your business. And then, if you are looking to sell the business, or at least have a choice to sell your business, that we do an evaluation of the business and are consistently looking to grow the value of that company and make it attractive for a buyer.

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Jody JohnsonWhat you need to know when buying or selling a business

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