Around the Web: A Week in Summary
A recent article from the VR Business Sales blog entitled “Why Bad Deals Happen to Good People” discusses several reasons a business transaction can go sour. No one plans to be involved in a bad deal, yet it happens often. Why?
A good deal can turn into a bad deal due to factors such as improper planning, poor timelines, and lack of communication. A buyer can help avoid these issues and develop business synergy with the proper approach and knowledge.
A recent article from Inc.com entitled “A Primer for First-Time Small-Business Buyers: What to Look for and the Questions to Ask” offers expert advice from BizBuySell President Bob House for individuals buying a business for the first time.
Buyers must be able to analyze the financials of the business they are considering purchasing as well as the terms of the deal. Common terms and tools to know include cash flow, EBITDA, multiples, balance sheet and income statement.
Once a buyer is ready to move towards a purchase agreement, they should stop and ask themselves the following key questions:
- Does the purchase description include an asset addendum?
- Is the price broken down into categories?
- Are there any outstanding warranties or seller responsibilities?
- Was a seller’s discretionary earnings (SDE) number provided?
A recent blog post from Certified Business Brokers called “Value Driver #9: Barriers to Competitive Entry (Business Moat)” examines how a business’ competitive advantage can affect its value. A buyer is likely to pay more for a business that has barriers to competitive entry (aka it’s hard for another business to come in and compete with it). So how does a business know if it has a competitive advantage?
Consider the following:
- Intangible Assets
- Customer Goodwill
- Cost Advantages
These factors can help create a competitive advantage, or as Warren Buffet describes it, a business moat.