Certified Business Brokers
The Business Transfer Newsletter
April 2017
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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.

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Authority on business transfer in our profession

Founding Members of the International Business Broker Association (IBBA)

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Selling Texas Companies Since 1974


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Buying or Selling A Business? 
Is It SBA Financeable?

Financial leverage has consistently been one of the key success factors in expanding the pool of buyers and closing deals. Fortunately for potential business owners, the SBA loan guaranty program is an excellent funding source for deals up to $5 million. Plus, lenders are lending now. A lender analyzes both the buyer (borrower) and the business being purchased. The following are five things lenders seek when evaluating a loan request for a small business acquisition.
  1. Positive Trend.  Nothing scares lenders more than negative sales and earnings trends in a business or its industry. Conversely, a pronounced positive trend is a thing of beauty to a lender. They often look back several years to see how the business performed through past economic cycles.
  2. Business Plan.  Buyers have to submit a basic business plan for the business they are acquiring. Lenders want to see an intimate understanding of the business and industry. In most cases a plan calling for modest growth and incremental change is the safest bet.
  3. Continuity.  Commitments by existing managers, key personnel, suppliers and customers to continue with the new owner represent reduced risk to a lender.
  4. Seller Training.  Lenders want to see a well thought-out management transition plan. The training/transition period can be anywhere from one to 12 months, depending on circumstances. Be sure to negotiate this point up front and clearly spell it out in the purchase agreement.
There is a general misconception in the small-business acquisition marketplace that a person could easily purchase any type of business through the SBA with a low down payment and get a loan for the rest. Most people also believe that SBA loans are a major source of small business financing. But data shows that SBA-guaranteed loans make up a small portion of the value of the overall small business lending market .
Number Of Small Business Transactions Jumps 
in Early 2017 While Median Revenues, Cash Flow Reach Record Level

Small businesses remain hot commodities with 2017 first-quarter sales of companies reaching the highest point recorded.   The internet marketplace tallied the number of transactions reported by business brokers nationwide.  The improving economy is encouraging current owners to put their companies on the market and spurring buyers to look for businesses.  Companies that are being sold are healthier than a year ago, with annual revenue up more than 8 percent. And sellers are getting better prices.

A total of 2,368 closed transactions were reported in the first quarter of 2017, a 29 percent increase from this time last year. Though the spike in small business transactions may be partly due to a rush of buyers and sellers looking to close deals around the New Year, a healthy economy, strong small business financials, and access to financing are also enticing more buyers and sellers to the market.

Businesses sold in Q1 grossed a median revenue of $518,159, a 8.4 percent increase from $478,000 in the first quarter of 2016. Median cash flow also increased, up 6.6 percent year-over-year to $117,275 from $110,000. These key financial indicators are the highest totals since BizBuySell first started tracking data in 2007.

In addition, the average multiple of cash flow, which remained flat over the past few quarters, increased 1.6 percent from 2.31 to 2.35. At the same time, the average multiple of revenue increased 2.5 percent from 0.59 to 0.61. These higher multiples emphasize how important it is for small business owners to improve profitability as they move closer to listing their business for sale.

The strong financials of businesses reported sold in the first quarter of 2017 resulted in owners receiving higher values for their business upon exiting. The median sale price increased nearly 8% from $220,000 in the first quarter of 2016 to $237,000 in 2017 despite the median asking price remaining flat at $250,000. This puts the average sale-to-asking-price ratio at 0.92. The strong ratio indicates the market is becoming more balanced, with healthy financial figures bringing both parties closer together in their assessment of fair market value.

Monarch Cleaners

This well-known dry cleaning establishment has been operating since 1938, and has been at its current location inside Loop 610 since 1999. The business services both residential and commercial accounts and provides pickup and delivery services to the upscale neighborhoods of River Oaks, the Heights, and surrounding areas.
The owner was ready to retire.  The buyer is an attorney and investor and owns two other businesses in the same area. 

The business was sold within six months of going to market. SBA financing was part of the deal.
Marcia Bowron listed the business and Hong Phan sold it.

Two Guys Pizzeria

This absentee-owned pizzeria was established in 1996.  It is ideally located in the Houston Medical Center with over 714,000 employees within a five-mile radius.  It is known for its fine quality and huge selection and has become a neighborhood favorite. Online ordering, delivery and take-out services in the area brings  approximately 60% of revenue. The restaurant also serves beer and wine.
The previous owner was ready to retire. The buyer, who had been working with us for a few years to find the right business to acquire, previously owned a pizza restaurant for seven years and worked in the food business for over 10 years.

The business was sold within two months of going to market.

Marcia Bowron listed the business and Chris Treleavan sold it.

Ask The ExpertsQuestion Ask The Experts


I'm relatively new to owning my own plumbing business. I'd like to grow over time and build something that I might sell one day. What's the best way to achieve that?
A:  There's a big difference between being self-employed and owning a business that has value apart from your direct involvement. One is not superior to the other, but they are very different creatures.

When a plumber retires, he may be able to sell his tools and equipment. But if he's a solo plumber, it is doubtful an outsider would pay anything for the business.

However, things might be different if that plumber had hired another plumber. Then a second.  And if he spent time developing a set of best practices or policies and procedures that each plumber followed so that the plumbing company's customers all had a similar experience. Maybe employees wear smart looking uniforms or customers all receive thank you calls after each appointment, or maintenance contracts are offered to top-shelf customers.

After years of growth and refinement, the plumber finds that he spends zero time in the field doing plumbing and concentrates, instead, on making sure his staff is delivering the best plumbing service customers can experience in his marketplace.

When the plumber decides it's time to sell, he owns a company with a recognized name and standard of excellence within the community that is not dependent on him showing up on any particular plumbing job. In fact, he finds he can take weeks of vacation off, and customers had no idea he was out of town.

Then.....This guy has something to sell. Something of value. He built a real business. 

This scenario isn't specific to just just plumbing. It could be web design, carpet cleaning, auto detailing, graphic design, bookkeeping, cleaning services, lawncare, handyman services, any number of business types..........even business brokerage.

Delegation is an absolute necessity for any business to grow. Do what you do best. Hire and delegate the rest.

Duplicate yourself. This step begins the differentiation between owning your job and owning a business. It's when you clone you. In our plumbing example, it's when the plumber hires another plumber. At first, it is simply for assistance. Eventually, other plumbers are doing all the plumbing. This is where the old motto applies, "spend less time IN your business and more time ON your business."

Multiply your markets. Or at least your market share. There are only so many stopped up toilets one plumber can fix in a day. But if you can add plumbers , you can increase the capacity of your business to serve more customers. You can increase the number of households you serve in your local community....or in additional communities.

You no doubt realize this is a high level, very simplified view of how to build a business. There are myriad details, and success is anything but guaranteed. To increase your odds it may be wise to surround  yourself with trusted advisors of every stripe to help you along the way.

Few will join you on your entrepreneurial journey and many will try to talk you out of it.  But if your heart longs to create something of lasting value, set your sights high and get ready for a long haul.  Above all, enjoy the ride.

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.

Texas Association of Business Brokers - Houston Chapter  International Business Brokers Association M&A SourceACG LogoTexas Restaurant Assocation Logo