Empire Business Solutions, a leading independent business brokers in Los Angeles and Orange County, California, has been a business broker firm for over 15 years with over 85+ successful transactions. Roy Moss, President, said “I talk to sellers all the time who want to sell their business. I often look at their business and see a business which would be difficult to sell for various reasons. This begs the question, what are the traits of a sellable business? Here is what I believe.”
Traits of a Sellable Business
Stable and predictable earnings: Think of revenue and earnings as the first introduction to a buyer. By far, revenue and earnings are the number one attraction. Over the last few years, are there patterns of growth or decline? If in decline, are there good reasons for the decline? The value of a business is directly related to risk and the lower the risk of losing the earnings in a transfer of ownership, the higher the price will be. Buyers are willing to proceed with a transaction when their perception is the earnings are predictable and will not only continue, but also increase in the future. A highly critical factor!
Records: Are your books and records up to date? Are your internal records updated after preparing the tax return? Do you file your taxes on time? Do you use modern software to keep track of sales, expenses and inventory? Answer no to any of these and it will be difficult to sell. In the purchase of a business, a buyer and lender will perform a high level of financial due diligence.
Management Depth: A strong management team reduces risk thus increases value. Can the company operate without the owner for more than a week or two? Is there good management to fill in while you’re gone? What is the average age of management? Are key managers bound by a non-compete agreement? What levels of experience and education do they possess? Having a good management team is critical to the transferrable value. If a company’s success is reliant on capable, well-trained employees – and not the owner – it means the business will not be negatively impacted under new ownership.
Contact Roy Moss, President of Empire Business Solutions at 714-374-6430 to discuss the process in selling or buying a business in Orange County. Empire has been in business since 2005 and is considered a leading California business broker with offices in Orange County and Los Angeles with primary emphasis on businesses in the $1.0 mil-$10.0 mil revenue range.