Certified Business Brokers
The Business Transfer Newsletter
September 2016
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The CBB Advantage:

M&A and Business Brokerage Firm Since 1974

Close  >60% of the businesses we list vs. 38% Industry Average

Consistently sold businesses within 94.5% of appraised price

We specialize and are experts in the Texas market.

Closed approx. 2,000 business transactions In Texas.

We are NOT a franchise

Authority on business transfer in our profession

Founding Members of the International Business Broker Association (IBBA)

Founding Member of the Texas Association of Business Brokers (TABB)

Selling Texas Companies Since 1974


Our monthly newsletters provide information about buying or selling a business, current economic conditions, and highlight some of our newest business-for-sale opportunities.


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"The best library of articles about how to sell

your business "..... says The New York Times

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Who Are The Buyers For Privately-Held Companies
When selling a business, it is important to know who the buyers are for privately-held businesses and why they buy.

Most owners of small and medium-sized businesses do not think about exiting their business nor do they plan for that inevitable day. They enjoy their work and their lifestyle. Many of them do not even realize that their business may be an attractive acquisition target.

If you have been thinking about selling, this article will help you see your company as a potential acquirer might see it. Understanding who the buyers are and their respective acquisition criteria equals better preparedness when the time comes to sell. Having realistic expectations and understanding the factors that drive value in the marketplace will further bolster an owner's readiness for a successful sale. Proper valuation and presentation to the most likely buyers is crucial to achieving a sale for the best price in the shortest time frame possible.

There are three main categories of buyers of privately-held small to midsize businesses: The Individual Buyer, The Investment Buyer, and The Strategic Buyer. Each category has distinctive characteristics and motives for making an acquisition. The price each is willing to pay is directly proportional to their motive.


The Individual Buyer represents the largest number of prospective buyers for small to midsize privately-held businesses. Target companies typically have gross revenues between $200,000 to $3 million. Why? Enterprises with gross revenues under $200,000 do not provide sufficient net earnings and those with revenues over $3 million become difficult for individuals to obtain the level of financing required and to compete with the other categories of buyers.

Most Individual Buyers seek enterprises that have full-time employees or management in place, documented operating procedures, a diversified customer base, verifiable financial records, and net earnings at least similar to their most recent salary with an upside potential for growth. These qualifiers give Individuals confidence in the business' continuity and stability. Employees who can run daily operations is more appealing than a business that is highly reliant on the owner's presence or is dependent on the owner's personal relationships with customers.

While Individual Buyers may not always know the latest techniques for valuing businesses, they are capable of determining if the business makes enough money to earn a livable salary, pay the debt service on the new loan to purchase the business, and provide a reasonable return on their investment. These factors are the ultimate test to see if the price and terms of the deal make sense.


One of the major market shifts for privately-held companies has been the growth in the number of Private Equity Groups over the last decade, they number in the thousands. The Investment Buyer's primary goal is to acquire a company, grow it, and then cash out, usually within five to seven years through either selling the business to a public company or taking the business public themselves. They are primarily influenced by return on investment and prefer to invest in companies with gross revenues in excess of $5 million with superior profit margins. Their targets usually have a unique business model with a sustainable and defensible market niche and position. Other traits that appeal to the Investment Buyer are strong growth opportunities, a compelling track record, a deep management team, low customer concentrations, and insulation from or a strategy to deal with import competition.


The Strategic Buyer is usually a public company or a larger privately-held company. Their targets are businesses that would compliment their own and that by combining the two would create a synergy of operations resulting in lower costs, new customers, and other advantages. Strategic Buyers are the most likely to pay more than other types of buyers because they gain a variety of financial benefits and quick business growth.

Synergy means that joining the two companies will produce more, or be worth more, than just the sum of their parts. Here's a simplified example: a large real estate company purchases a mortgage company. It can now use its existing customers (those who buy homes) and offer them the mortgage funds to finance their purchases. The benefits of this type of acquisition help both companies be more competitive and profitable.

Generally, Strategic Buyers target companies that have gross revenues in excess of $2-3 million, offer unique market share not readily available to their own company, such as opening in a new market not previously served or obtaining product lines and/or services not previously provided, but synergistic to their own customer base. Target companies will be especially attractive in industries where economies of scale are possible whereby the acquiring company can obtain significant post-deal expense savings, such as elimination of dual facilities, support staff, or other overhead expenses

Lake Livingston Golf Cars
From left to right, top to bottom: James & Mike Shanahan, Saul Del Rivero, Dan Shanahan (Buyers), Cindy & Joe Burch (Sellers), Marcia Bowron (CBB Broker)

This was a well-run business with clean books and records. Joe and Cindy Burch started the business on their own with a handful of used golf carts and grew it to a $3 million enterprise in less than five years!
The buyer, SDRGC, Inc, a family-owned partnership, which has invested in approximately 19 different businesses ranging from Catering companies, to Medical training companies, Flooring companies (they purchased Pro Floor through us a year ago), Manufacturing, and Industrial Construction. They look for bolt-on/add-on companies to their existing base of companies and now have a golf cart dealership they plan to expand on. Wealth of experience and knowledge in the group.
This business was sold within 9 months of going to market. The property was included in the sale as well. Some seller financing was part of the deal.
Marcia Bowron listed and sold the business.

Ask The ExpertsQuestion Ask The Experts


How is working capital handled in a sale?
Working capital is like gas in a car - it makes your business go. So when buyers acquire a company, they expect some "fuel" to be included in the tank.
Some business owners may get lax about working capital. They get in the habit of fast payment, slow collections, and excess inventory, which turns their well-oiled machine into a gas guzzler. If a business gets put up for sale in this condition, you're basically giving away money.
Working capital can be a sticking point in negotiations, so the sooner you minimize working capital the better. Plan to make adjustments at least a year prior to putting the business on the market as most working capital benchmarks are commonly tied to the trailing 12 average.

Texas Economic News

We watch economic and market conditions compared to the rest of the country because these factors affect business value. The following articles were all published since our last newsletter.





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