Common Questions and Answers

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Questions & Answers

If you are new to the acquisition process, you probably have a number of questions about business sales and acquisitions. You can find a lot of answers in our Knowledge Center regarding buying and selling a business. In addition, we haveaddressed several common questions here to help you get started. Please contact Twelve31 Advisors for assistance with additional questions you may have.

Common Questions for Business Buyers

The main advantage of buying an existing business, versus starting one from scratch, is that there is existing cash flow (presumably, positive cash flow). Beyond that, there are existing processes, people and resources in place from day one. While these aspects may be improved by an in-coming buyer, the fact that they exist in some fashion accelerates the possible ROI opportunities. Additionally, existing businesses are typically easier to finance.

Business transactions typically entail a mix of buyer’s equity, seller financing, and third party financing. Which mix is right depends on your personal investment capability, the specific business’ dynamics, and economic trends. Small Business Administration (SBA) loans are frequently used, as are retirement funds. Many people don’t realize they can use their retirement funds such as 401ks, IRA’s, Company Pension Plans, etc, without penalty, to start a business.

Most businesses valued at $2 million plus never even get advertised on the internet. In lieu of mass internet marketing, these businesses typically target select groups and individuals across the country (or even the world) to complete a transaction. Twelve31 Advisors maintains a database of buyers looking for these type of businesses, and utilize our network for further reach. If you are looking to buy a business valued at $1 million plus, or for a strategic acquisition, we highly recommend you Contact Us today and discuss your acquisition goals.

Most business buyers begin their search process online and many websites exist that advertise businesses for sale. Twelve31’s  website offers a number of businesses for sale, representing a wide variety of industries and sizes – from $50k to $5m.  Once your Twelv31 Advisor understands what you are looking for in a business, s/he can present you with opportunities before they even go online.

Common Questions for Business Sellers

Ultimately, any business is worth what somebody else would be willing to pay for it. While seemingly an obvious and simplistic statement, many business owners  are challenged to objectively view their business in this manner. How that market value is established and the right asking price is determined can be addressed in valuation formulas, depending upon the size and nature of the business. The two main factors that determine worth: cash flow and risk.

The simple answer, better results. Business brokers and intermediaries specialize in preparing, pricing and marketing businesses for sale.  Additionally, they are connected with a pool of potential buyers. You are able to focus on running and improving your business, while your broker is finding and screening the buyers, and guiding the process to a successful closing. Given this expertise and focus, you are far more likely to sell at an optimal asking price and optimize your net proceeds, all in a shorter period of time.

While these terms are widely used within the industry, there is not a standard definition. Twelve31 Advisors generally classify businesses valued at less than $2m as Main Street, and greater than $2m as Middle Market. However, there are other factors that distinguish Main Street from Middle Market. For example, in Main Street transactions, the parties (seller, buyer, broker) are typically local; in Middle Market transactions, the buyer may be in another state or country, and may be an individual, private equity group, or institutional investor. Additionally, while most Main Street transactions are asset sales, alternative deal structures are typically contemplated with Middle Market company transactions.

A Information Memorandum or simply “the book” it is one of the marketing pieces that will be prepared for your business by Twelve31 Advisors. It provides comprehensive information about your business to prospective buyers who have signed a non-disclosure agreement.

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