FAQ Buyers

1. Why is Confidentiality so important in the business buying process?

If employees, customers, suppliers or lenders hear about a business being for sale it could cause issues for the seller even if the buyer doesn’t buy the business. The buyer can move on to the next business but the seller has to deal with the fallout. Employees and business buyers have a common interest. Buyers usually want the employees to stay and employees want the buyers to keep them as employees.

2. Why Buy an Existing Business?
The main advantage of buying an existing business, versus starting one from scratch, is that there are customers generating sales in place on day one of a business purchase. Beyond that, there are existing processes, trained employees, suppliers, a business name known in the market and other valuable factors. Finally, an existing business with positive and provable cashflow is generally easier to get financing for than a startup business with no proof of success.
3. What does “Cash Flow” mean?
Cash flow as used when buying a business is usually not the same definition of cash flow as used by CPAs, and accountants. In buying a business Cash Flow most often is defined as “Earnings (profits) Before Interest, Taxes, Depreciation and Amortization (EBITDA) PLUS Current Owner’s compensation. So if EBITDA is $50,000 and the owner took out compensation (salary, non-business expenses, other benefits) of $150,000 then the Cash Flow would be $200,000,
4. What Kind of Financing is Available to Purchase a Business?

The primary lender for this market are banks who offer Small Business Administration (SBA) backed loans. For qualified buyers and businesses a rule of thumb is the buyer needs approximately 20% down payment from their own funds. Speak to your broker for more details and which banks are active with SBA loans for business acquisitions.

5. How long does it take to buy a business?
As you might imagine there are many variables but, in general, in todays market once you make an offer on a business it takes about 75-90 days to get your SBA financing in place and close on the purchase.

FAQ Sellers

1. How long will it take to sell my business?

As you might imagine there are many variables. It typically takes 6-9 months to sell a business, in some cases up to a year. In general, in today’s market once an offer is made on a business it takes about 75-90 days to get SBA financing in place and close on the purchase.

2. What should I do in preparation to sell my business?
3. How is the Asking Price determined?

The process of pricing a business is complex.  There are 9 key elements for pricing a business correctly and about 12-15 more issues to be considered when determining what a buyer might be willing to pay for the business.

4. How do we maintain confidentiality?

The protection of confidential information is a very important element of selling a business in Texas. Confidentiality Agreements (CA) are also often called Non-Disclosure Agreements (NDA) and are signed by all potential buyers before releasing information specific to your business. Failure to honor the terms of the confidentiality agreement could subject potential buyers to legal action and possible damages.

5. When is the right time to sell my business?
When you want a lifestyle or professional change and your business is still growing.