The Business Transfer Newsletter

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November 2021

Selling Texas Companies Since 1974

Our monthly newsletters provide educational 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

Own The Property? How Is The Real Estate Handled When Selling Your Business?

Many business owners we speak with own the building(s) and land where their businesses operate. Sometimes a separate LLC or incorporated business owns the real estate, sometimes it’s owned by the business, and sometimes the proprietor owns it personally. In any event, most businesses pay rent to themselves or to their own real estate holding company.

No matter how the real estate is held, many owners desire to sell the real estate with the business. There’s only one problem. Many buyers that will want to acquire your business will not have the capital to also acquire the real estate. Or they may feel that parking a significant investment in real estate makes a large portion of their investment capital unavailable for growing their new enterprise. The ideal scenario that creates the largest buyer pool is for the seller to offer the real estate for sale or for lease at the option of the buyer.

Where is the Wave

I first started hearing about “the wave” back in 2007. It had been widely discussed and written about years before it hit my radar, though. The wave comes with an eye-popping price tag of $10 trillion.

Based on size alone, many refer to the wave as a tsunami.

The wave, of course, is the $10 trillion of wealth that will transfer when the Baby Boom generation decides to call it quits. Ah, the Baby Boomer retirement: much anticipated, widely studied and largely non-existent up to this point.

Planning for retirement can be a sticky wicket in any circumstance. Retiring Baby Boomer business owners face an additional challenge in figuring out how to exit their business through an outside sale or internal transfer method. Regardless of how they do it, millions of Baby Boomers will need to transfer ownership of their business in the coming years. This has led folks like PricewaterhouseCoopers to predict an oversupply of businesses for sale, resulting in downward pressure on valuations and a buyer’s market between 2018 and 2025.

Deal Momentum: A Key Factor When Selling Your Company

KEY TAKEAWAYS: When it’s time to sell your business, your numbers must tell the right story.

Calculating SDE is a way to standardize or “normalize” a company’s earnings so it can be more accurately compared to the earnings of other companies and the industry as a whole.

If you own a small to mid-size business, it’s important to have a good understanding of Seller’s Discretionary Earnings or “SDE” and how its calculated.

By doing so, you’ll gain a better understanding of your business’ true earnings, an accurate picture of its value, and insight on things you can do to enhance its value as you move forward.

In this blog, I’ll more fully explain what SDE is, how it’s calculated, and finish by showing a real world example of how you can recast your financials to calculate your SDE.

Small Business Owners: Prequalify Your Business for a SBA Loan Early in the Selling Process

Why? Because SBA prequalified businesses for sale in the marketplace sell faster.

The normal train of thought for most people is that it is only the buyer’s responsibility to get prequalified and get financing for the purchase of a business. Yes, the buyer must be able to qualify for a loan. However, the business must be eligible as well. No banking institution will approve a loan for a business that does not provide the cash flow needed to support the payments. Therefore, it is beneficial to the business owner to prequalify the business beforehand.