Price vs Value in buying a business
PRICE: The amount of dollars or consideration a buyer agrees to pay and a seller agrees to accept under specific circumstances surrounding a transaction.
VALUE: The worth of something
There is is….two simple definitions that drive the question of every #business sale in Orlando and anywhere else. Add to that mix conundrum the many #advisors and #opinions that get thrown into the mix and you get a scary statistic. Namely less than 20% of all businesses that go to market sell.
I could go on for days about business value but the simple answer to this challenge is deals only get done when one does not fixate on value or price (buyer or seller) and each party recognizes the deal has to work for both.
Some things to recognize in no particular order:
1. There is a vibrant and fluid marketplace here in Florida. Business sales are tracked far more closely than any other state in the union so there is data that can help buyers and sellers find middle ground. In other words we can get some comps and statistics to assist in determining MPSP (most probable sales price). And both the buyer and seller need to recognize one will not get the upperhand over the other. WIN WIN is the #NAMEOFTHEGAME
2. Buyer and Seller must get real: What that means is buyers must realize they are not alone and that although they may want to buy something they are competing with other buyers who have a competing interest and desire that is often not arms length (more on that later). Sellers must live in the reality of the economy. Folks don’t have $1 million in liquid cash if they did they are stupid and you wouldn’t want to sell to them anyway. Therefore a third wheel of financing (#SBA, Commercial Loans, #Owner Financing, etc) comes to play and reality is they have a say so in the deal. Love it or Leave it.
3. #Business Buyers listen up. Of the 500 plus businesses on the market in Central Florida less than 20% have tax returns that are completely accurate. And even then they inevitably have been prepared for some element of tax mitigation. Business Buyers generally have not ever owned a business and as such do not understand the realities of taxation for the small business owner. If you want perfect books and records you are going to be looking at a very very small number of opportunities and you will pay a premium (#moremoney) for that. Also just because a seller gets creative on his book keeping don’t think you cant prove it. #Sellers need to realize that your creativity has a #cost.
4. The #Costofcreativity: Mr. Seller who has a creative accountant that saves them taxes year over year…guess what? If you cant prove it you cant count it, Banks don’t accept all addbacks (indeed very few for #sba ) and in a phrase “If you beat Uncle Sam once you will not beat him Twice” Your tax mitigation so to speak generally costs you on the sales price and terms so choose your poison.
So the lesson here is get real, get educated and get paid. Sellers realize the unintended consequences of your choices in running your business and buyers get off your high horse and live in the real competitive market.
For questions and or an analysis of your personal situation please contact me at www.businessses4saleorlando.com or call 3212870349
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