Jun 19, 2020
Frequently Asked Question Episode:
Each week I answer three questions about business value or selling
companies that come in from the website or social media. This is a
little bit shorter of an episode, but hopefully it will be helpful
in your journey to making a salable company. This week's questions
What do you get when you buy a business?
- You want to buy the assets of the entity as it is the most tax
advantageous to you, limiting the risk associated with acquiring
- The assets you acquire typically include:
(sometimes, accounts receivable, accounts payable)
How to sell businesses for a living?
I'm assuming you are looking at becoming a business broker or
investment banker. Here are a few things to keep in mind if you
venture into this industry.
- Age and experience matters - You cannot expect a business owner
to entrust most of their net worth to you without any assurance
that you know what you are doing
- It would be best if you had a runway. It takes 6 to 12 months
on average to sell a business. It would help if you had enough
capital to get your practice up and running, as at least a portion
of your fee will be success oriented.
- It would help if you had an understanding of financial
statements and sources of capital
- You need to understand how to evaluate buyers concerning your
- You need to know you are in sales (the business is your
product) and are not there to fix the business, but to sell it.
(Some firms offer ancillary exit planning services-I assume you are
only interested in selling)
- You need to understand that the process is relational between
you, the buyer and seller. There are a lot of dynamics at play -
most of which you don't know about. Everyone has baggage.
- You need to understand that the best buyer may not be paying
the highest price
- You need to realize that you are operating in the irrational
(for both buyers and sellers). Expect decisions and positions that
- You need to know the difference between value and price.
- You need to know that the closer you are to closing, the less
control you have.
- Bonus: Finding a buyer is only about 30% of the job. Getting it
to the closing table is where you earn your fee.
There likely is no better time to be getting into the business.
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