How is the value of my business determined?
Several factors are involved in determining valuation. In a preliminary discussion with your
intermediary, it is helpful to understand your business trends the past few years and its prospects
for the future – has your business seen consistent top-line growth, has it been affected by a tough
economy, what assets will convey with the sale, is your company growing, etc.
Ultimately, the value of the business is determined by what the market will pay. The market treats
business types and industries differently - a blue collar construction company will be valued
differently than an online wholesale distributor. Additionally, a financial buyer will ascertain one
value, while a strategic buyer another. For this reason, we suggest a valuation range in our
engagement, and in many cases don’t offer an asking price to the market so as to not leave money on
the table for the right strategic buyer.
What is the difference between an asset sale and a stock sale?
In an asset sale, the company transfers the assets of the business to the buyer. These assets may
include inventory, equipment, real estate, goodwill, copyrights, patents, leases, customer lists,
In a stock sale, the company transfers shares of company stock to the buyer. In some cases it is more
appropriate to consummate a stock sale as it is more advantageous for tax reasons, the transfer of
key contracts, licenses or other considerations.
Why should I use an intermediary?
There is a lot of time, professional skill and nuance involved in finding the right buyer for your
business. Oftentimes, owners who try to sell their own business get side tracked with the process and
forget to “work in their business”. The result is a hiccup in performance which then scares the buyer
or their lender from moving forward with your transaction. Get help and protect your interests by
letting someone else negotiate and work on your behalf while you focus on maintaining your performance.
Also, business intermediaries have extensive databases of qualified financial and strategic buyers. Many
times owners end up selling for a lower asking price because they don’t have access to multiple
qualified buyers who are interested in bidding up the value of their company.
What happens when someone is interested in my business?
BAMA adheres to the following process when there is a buyer interested in one of our seller engagements:
How long does it take to sell a business?
On average, it takes 6-9 months to sell a business with BAMA. This timeline is just an estimate - some
businesses take longer to sell, others close more quickly. There are several keys to ensure a timely,
A willing seller –
The seller must be ready to sell. Many sellers think they
are ready to sell, but when the time comes to sign a Letter of Intent or Purchase Contract, they have
second thoughts. A willing seller has thought through the process and is ready to sell for a specific
A qualified buyer –
There are a lot of tire kickers in the market. A buyer
who is qualified both financially and experientially will ensure that time isn’t wasted on a
transaction that won’t be consummated. Additionally, the lending environment has changed for the
foreseeable future. This means buyers must have access to sufficient capital to get your transaction
done. You may need to support premium valuations or those with limited assets and significant goodwill
will seller financing.
An accurate valuation –
It is important the seller agrees to a valuation that
is supported by the market. If the seller believes their business is worth a 5x multiple, but the market
is only willing to pay a 3x-4x multiple, then your business will likely not sell. The market is smart
and efficient. Money goes where it will be treated well and generate appropriate returns for the risks
and market factors of a specific business.
Why should I use BAMA?
Business Acquisition and Merger Associates uses its proprietary, multi-faceted marketing program and
professional skill to complete successful business transfers. If you’ve decided it’s time to sell your
business, let our investment banking process and large database of qualified buyers bring you multiple
offers in a tight timeframe.
If you’re looking for a specific company, let’s discuss your acquisition model and we’ll show you how a
buy-side engagement will return the results you’re after. Our proven processes have resulted in many
satisfied buyers and sellers.
Do I need to provide seller financing?
Chances of selling your business increase dramatically if seller financing is offered. It widens the
pool of buyers and proves you are confident in your business, which often helps lenders and buyers get
over the hump when valuations are on the higher end of market.
Offering seller financing shows you believe your company is worth the asking price. You aren’t going to
offer financing if you don’t believe the buyer will be able to make your payments.
Acceptable seller financing terms result in a selling prices that is, on average, 16% higher than all
cash offers. Additionally, when seller financing is offered, sellers get the added benefit of interest
payments which are over and above the asking price and usually more than the seller can get from their
own financial institution for the same money.