Saleability of a business has to be focused upon and this cannot be side-tracked as an irrelevant issue. It plays a major role in business transactions and dealings.
Several issues crop up when one focuses upon saleability of a business and here are few of them:
1. Financial Results –
The focus is on absolute value and trend of sales, margins, wages/payroll/occupancy costs, net, supportable seller’s discretionary earnings (“SDE”), and working capital requirements. Interim financial results are of much importance as well.
2. Customers –
Loyalty, quality, concentration, industry & geography, diversification need to be given adequate attention.
3. Products and Services Offered –
There is much variety, mix, pricing leverage, intellectual property content, brand names no doubt.
4. Productivity & Efficiency –
Employees, computer & software releases, website, and point of sale system are very important issues that one cannot ignore.
5. Industry Cyclicality & Seasonality
6. Years in Business:
Experience does count and those who have been in business for very, very long time to have an upper hand. They are well established.
7. The General Economy – U.S. and local
8. Willingness to carry a Seller’s Note – An all-cash price is no doubt discounted.
9. Scalability/Upside Potential:
These factors are important as they involve required additional investment, effort as well as risk.
10. Business After Sale Issues –
Pre-paid services, warranty exposure, returns, employee commitments, equipment leases as well as other liabilities that need to be assumed.
11. Competitive Threats –
Internet, home-based, franchises, industry leaders do mean competitive threats. Competition has to be faced.
12. Facility Lease –
Rate vs. Market, term, renewal options, landlord reasonableness are issued to reckon with.
13. Employee Census –
Years of service, age, pay rates vs. market, relatives, skill sets/licensing/certification pending retirements, worker’s compensation moderate, and unionization have to be taken into consideration in matters of business.
14. License Requirements & Regulatory Issues:
A license is essential to set-up business and there are rules and regulations to be followed.
15. If applicable, third party requirements of franchisor, dealer, landlord, SBA, and others have to be looked into.
16. Barriers to Entry: There are barriers to face even in the business worlds and often one finds it either difficult to sell a business or even set it up.
17. Vendor relationship, pricing commitments & leverage: These aspects of a business are very important and cannot be overlooked.
18. Seller After-Sale Issues –
Training/mentoring, consulting availability, non-compete risk, etc. are issues one has to comply with while doing business.
19. Facility and Equipment –
Age, condition, productivity, replacement cycle, workflow, capacity, technology.
20. Specific Location and Area Socio-Economic Trend –
These are the important success factor for some businesses. They do play a prime role.
21. Marketability, demand, and availability of buyers with the necessary financial resources & experience can be very essential for the success of the business or even its sale.
Saleability of business is not an easy proposition and many factors do influence the sale and these factors cannot be ignored.