Category: Business Evaluation

How to Evaluate Businesses for Sale in Columbus OH

Buying or selling a business is often the biggest transaction you will have in your life, maybe except for your home. Therefore, it can feel overwhelming. It’s crucial that you use accurate way to measure the real value of the business, reagardless of which side you’re on. If you fail to do this, you could end up in a disaster situation. So avoid pitfalls and enjoy a profitable transaction by following techniques, methods, and strategies that successful people use. Here’s how to determine the market value for a business:

Creating a plan for the business:

Will you owner-operate the business?

Deciding whether or not you will own and operate the business is a big step in deciding its value. This is mostly relevant if you’re buying one. If you’re selling it, it’s still important to understand the mind of your buyer.

If you are planning on operating it, rather than having a passive asset, this could affect how much time you have to put into it. If it makes you X amount of money over Y years…then you have to recalculate to add your time into the equation. Know how much your time is worth and then you know how much the business is really worth.

Will you exit or sell the business?

If you plan on selling the business after you buy it, you could multiply the amount of times the revenue duplicates over that sell period. However, if you’re going to exit it in another way (investment), you should view its value in the lens of how much people are willing to put their hard earned funds into it while it’s still growing when you want to evaluate a business for sale.

Financial information provides most accurate data

Rely on documented sales and expense data

A common tactic when selling a business is that owners will give you all kinds of great stories as to how successful it is. They’ll use general phrases like “great” and “growing.” The problem is, this is all subjective. To get to the bottom of how much the business is worth, you need to cut through those vague terms and get to the numbers: what is documented as their expenses and sales on paper? This is your answer.

Sources

  • Quickbooks – When looking for sales and expenses, make sure you look at their Quickbooks. Virtually every business today uses this software. If they don’t on a regular basis, then their accountant almost surely does. It is organized in a way to make it easy to separate and sort categories when you want to evaluate a business for sale.

 

  • Book Keeper – Arrange a personal interview with their bookkeeper when you want to evaluate a business for sale. You never know when you’ll find some things that they know that the owners left out. The book keeper will have daily inside knowledge of the runnings of the business, so their opinion is invaluable.

 

  • Annual Profit/Loss statement – The P and L is the proof in the pudding. From small businesses to mega corporations, you need this document.

 

  • Other legitimate ways to separate out business expenses -Bring in tax, accounting, and legal experts when you want to evaluate a business for sale. Often times they can find expenses that are categorized in certain ways to your advantage.

Other evaluation methods

  • Broker based opinions – It’s never a bad idea to bring in a broker. Our second opinions give you a professional insight into what will sell, for how much, and what won’t.

Lending Capacity

  • Francises v Independent businesses – Franchises are able to leverage the track record of the parent company and proven business model to secure higher levels of financing than independent businesses. Depending on the buyer’s plans for the business after the fact, this can be a big factor. Don’t overlook it. It’s key when you want to evaluate a business for sale.

Price business based on adjusted cash flow using a multiplier

An ecommerce store online might be priced differently than an auto parts store. Ecommerce, for example, often sees 20x multiples on monthly profit. By knowing cash flow, you know where it should be priced, whether you’re buying or selling.

List price and market price should be close to one another

Owners evaluation

The owners of businesses for sale in Columbus OH may often have certain reasons behind their pricing. Perhaps it’s too low because they’re desperate. Maybe it’s too high because they’re overvaluing it. Understand that the owner’s initial offer is not the final word.

May be emotionally based Emotions can cause a lot of deals to get complicated. When evaluating a business for sale, keep the emotions in check. People are people, but the numbers don’t lie. Listen to the data every time and you’ll be just fine.

Owner has historical ties to business. If the owner is the face of the business, you should consider this. Often times, restaurants will change hands only to lose business.

Professional opinion

  • Fact based – You get the facts with professionals, such as brokers. We don’t sugar coat it, which gives you an advantage going into the transaction.

 

  • Data driven – Using data, we can help you arrive at a comfortable and fair price. Big data today allows us to pull from various comparable businesses based on reasonable historical data and facts. Don’t get distracted by emotion and outside circumstances.

 

  • May include calculations of operations and equipment

Human and physical capital all come into play. The valuation will be determined based on the combination of these, otherwise it wouldn’t be accurate.

Evaluate Businesses for Sale in Columbus, OH

When it comes to buying or selling a business, it isn’t easy. However, it can be made more tolerable and you can achieve more financial success from the transaction if you use the right data in the right way. Don’t make the common mistakes people make that ends them up regretting their decision. Instead, follow the outlined strategy above and you’ll see your bank account grow to new levels.

If you’re interested in businesses for sale in Columbus OH, let the professionals help. Get in touch with us at Sokol and Associates today.

Unexpressed Liabilities with Owning a Bar or Restaurant

Just like in other businesses, owning a bar can be very rewarding, but to make it successful you need planning. In many cases, the liabilities of owning a bar may seem high at the time you are starting the business. Despite this, there are major benefits if you follow a few requirements.

 

Liabilities of Owning a Bar or Restaurant

With a liquor liability, you are protected from suits arising from damages related to intoxication. More to this, the liability of owning a bar gives you a guideline on how to handle the alcoholism of your staff. Despite your established work rules, the liability gives them a way to handle the job. More to this, it allows you to look for a policy that will cover them as patrons, an option that will help protect your business from liquor-related incidents.

Another common measure is to have your bartenders trained appropriately. One of the key benefits of training is equipping them with the knowledge on how to handle drunken customers as well as alcohol-related damages and fights. The training should be on a one-on-one basis with each of them owning an insurance scheme that will act as a shield against any incident that may occur at work.

 

Department of health

Legally, any company or restaurant that serves consumables to customers should take liability coverage. This is one of the best policies that help protect one from any alcohol-related incident once a patron has an incident in your bar. The legal fees from liquor-related claims are always higher than the insurance legal fees. To avoid such incidents, always protect your business from any liability through the adequate coverage.

Just like in restaurants, this legal policy goes hand in hand with the food inspection that you offer in your bar. The main aim of the inspection officers is usually to determine whether what you sell is within the legal frameworks and the requirements of the state. The process is always important as it helps protect your business from incidents that may emanate from the products you sell. The inspection is conducted at least twice a year meaning that you should always cooperate with the inspection officers.

 

Proper insurance

After you have worked hard to establish your business, you do not have to commence the operations immediately. Legally, once you acquire a liquor license to operate or use the premises you can. Also, the insurance policies that cover the liability of owning a bar may vary depending on where you live. It is therefore important to consider research on the specific needs of your state requirements on how to carry out the process.

While looking for suitable insurance agents, you should always be keen to get ones that are familiar with the different state laws. They should also be in a position to explain to you the specific coverage requirements that will be important for you. As a bar owner, you should always be ready for non-scheduled inspections on your premises. This is done following the state laws aimed at ensuring your insurance and other policies are in place and effective.

 

Fire department

More to the liabilities, your bar should always be inspected and awarded an occupancy permit. The bar is always prone to flammable decorations, a factor that would cause great mayhem if not looked into. A rigorous inspection on sprinklers and fire extinguishers should be conducted. Other injuries may emanate from accidental spills of either hot foods or beverages.

Ultimately, the customers and the owner of the bar feel the repercussions of any injuries. To avoid these altogether, safety evaluation is important through various independent bodies that inspect business premises to identify any hazards.