Why Is It Important to Understand the Value of Your Business?

Regardless of the size of your business, you are likely very familiar with your bottom line. You know if your business is making money. You know that you paid for your equipment and building. You know what your inventory costs. But do you really know the value of your business?

The value of your business is something that is not so easily defined. There are a lot of factors that go into determining the value of your business, including the local economy and depreciation values. There are several reasons you may need to know the value of your business, and it is best to be prepared in advance for any situation.

Events in Business

If you have a partner, want to get a partner, or want to increase shareholders, you will need to know the value of your business and the value of the shares. Another common reason to need to know the value of your business is when you need additional funding. You may want to get a small business loan to expand your operation or meet operating costs in a down year. Lenders will want to see hard evidence of the value of your business. (more…)

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The Worst Mistakes Business Owners Make When Selling

Selling a house is hard enough, but selling a business can feel impossible. Unless you ran a commercial real estate business, you probably don’t know the first thing about selling your company for a profit. It’s important that you know what to do and what not to do. Try to avoid these mistakes so you can secure your sale and walk away happy.

Don’t Get Greedy

Finding the right selling price is perhaps the most challenging component of selling a business. If you set your price too high, you will discourage legitimate leads who aren’t willing to shell out such a high figure. Bidding too low, on the other hand, will rob you of your profit margin and put you at risk of breaking even – or worse. Finding your sweet spot for pricing is largely based on the size of your business, your context behind selling, the industry, and the local market.

Don’t Ignore Marketing

Just like homeowners need to carefully clean and stage their homes for listing pictures and open house events, as a business owner you need to promote your company to make it appealing to potential buyers. You cannot expect your broker to do all of the work! Put effort into marketing the positive aspects of your business and all of its potential.

Don’t Sell On a Whim

The devil is in the details, right? It is essential to plan ahead and schedule to sell your business within a reasonable time frame. Going into your sale without preparation, or waiting too long to approve a buyer, can have many negative consequences. With a bit of long-term planning, you can be sure that all of your information, records, and paperwork are updated and prepared if you unexpectedly stumble upon the perfect buyer. (more…)

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How Much Do You Know About Your Commercial Lease?

17It may be your dream to own your entire business right down to the land where it sits, but if you’re like most business owners, you are currently leasing your business space. When was the last time you looked at your lease and brushed up on its details?

Don’t underestimate the importance of knowing your commercial lease. Sometimes, the information hidden in the fine print can make or break your business! Here’s what you need to know.

Lease Terms

Lease terms have caused countless business sales to fail. It is possible that your existing building lease contains clauses that can complicate the terms of your sale or make it impossible altogether.

Assignment and Subletting

The authority to assign and sublet a restaurant is often restricted to the landlord. You should expect to seek your landlord’s approval before initiating negotiations, though some leases do contain the term “permitted transfer” to allow for sales without landlord consent.

Renewal Options and Periods

Most restaurant leases require business owners to renew a lease no more than 180 days prior to the termination of the current lease term. This puts you into a position of having to exercise your renewal option in a relatively short period of time, which then puts you at risk of getting locked into battle with your landlord over a lapsed lease and lost option rates. (more…)

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3 Essential Things to Know Before You Sell Your Restaurant

sellingadviceSelling your restaurant is no easy feat. It isn’t something to jump into without the right support and preparation. Make sure you understand the essentials of restaurant sales before you get the For Sale signs ready.

Research Price Valuation

The wrong price can destroy your chances of selling your restaurant. Potential buyers may use one of a few different methods to determine the price they’re willing to pay for your business.

Assets in Place Method of Valuation

If your business is not making money, or it is marginally profitable, you will most likely pursue an Assets in Place purchase. Your buyer will pursue the fixtures, equipment, lease, and licenses that go with your business. In an Assets in Place purchase, your buyer most likely has his own menu and concept in mind, so he is not interested in the name or menu of your existing restaurant.

Going Concern Method of Valuation

A Going Concern method of evaluation indicates that your business is making money and the buyer has an interest in maintaining your business model, including the name, menu, operating systems, and personnel. With this method, the lease, leasehold improvements, fixtures, equipment, name, menu, concept, goodwill, and cash flow are included as part of the sale. (more…)

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