Certified Business Brokers
The Business Transfer Newsletter
October 2016
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How Much is Your Business Worth? 




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Consistently sold businesses within 94.5% of appraised price

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Closed approx. 2,000 business transactions In Texas.

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What You May Not Know About Company Value
Most small business owners have unrealistic ideas of how much their business is worth. Part of the confusion is caused by what people read in the news. The sale of big companies reported on the news and the valuations they achieve have very little to do with the business valuation of small, privately-held businesses. Here are 6 facts on business valuations that surprise most small business owners.
1. Small businesses usually don't sell for a multiple of revenue. The buyers of small businesses are often individuals who are getting into business for themselves. In other words, they need to make sure the business generates enough profits to pay their bills. As a result, the profits of the business matter a lot more to the business valuation than the revenues do.
2. Future growth potential doesn't increase the value of the business that much. Unfortunately, the buyers of small businesses place an emphasis on the proof of profits. While the buyers of larger companies may make a strategic purchase and pay millions or even billions for a company that has not proved itself profitable, the buyers of small businesses primarily base what they are willing to pay on the profitability history of the business.
3. The business value doesn't go up just because it's been established for a long time. Unlike real estate that typically experience appreciation over the long run, the value of a business doesn't necessarily increase due to a long operating history. Having too short of a history can hurt the value of the business, but a company that has been in business for 50 years is not automatically more valuable than one that has been in business for 10 years.
4. The most recent year's performance trumps the historical performance. If a company was profitable for many years but experienced a bad year last year, the value of the business would be dramatically hurt. Conversely, a company that performed poorly for many years but experienced a great year last year would see an increase in the company value.
5. The buyers don't pay extra for equipment. From the buyers' perspective, the company equipment is just stuff one needs to run the business. Having a lot of expensive equipment does not increase the business valuation, and all the equipment is typically included in the sale price of the business. If a manufacturing company has $1 million worth of equipment but a business valuation of $400,000, the owner is typically advised to sell off the equipment rather than selling the business along with the equipment.
6. It takes time to translate a business valuation figure on paper into cash at the bank. The national average to sell a business is 6 to 12 months. Having realistic expectations will help small business owners obtain and achieve the company valuation they are looking for.
Custom Cove Countertops

This custom countertop fabrication and installation company has been serving Greater Houston Area customers for over 39 years. The company offers both installation and fabrication services for kitchen and bathroom countertops as well as commercial laminated cabinetry. Customer base is comprised of 80% commercial contractors and 20% residential.
The Buyer is the owner of Contracting Unlimited and this acquisition will expand his market area and service capabilities.
The business was sold within 3 months of going to market.
Anita Charpiot listed and sold the business.
Sugar Land Party Rentals

The semi absentee-owner of this party rental company in Houston also owns a few postal centers and is in the process of acquiring another. She wanted to sell the party rental company in order to focus on growing her postal center holdings.
The Buyer is a professor for UTMB school of nursing. She used her 401K funds to make the acquisition through Guidant Financial.  Her sons will be instrumental in working in the business and she will continue as contract professor at UTMB. 
The business was sold within six months of going to Market.
Marcia Bowron listed and sold the business.
All-Pro Transmission & Total Car Care

This business opened in August, 2014 and has experienced explosive growth since inception and is on course to have a record year in 2016. The business operates in a 4,000 square foot building on a major thoroughfare in fast-growing Tomball and has six repair bays, an office and a Customer Waiting Room. Overall the general public makes up 60% of the sales and commercial accounts make up 40%.
The buyer served six years as a Reconnaissance Marine (Special Forces) and has a Bachelor's Degree in Business Administration in Management and Minored in International Business. He also has management experience in the oil and gas industry. This was the only business he looked at with us and closed the deal within two months.
The business was sold within three months of going to market. Some seller financing was included in the sale.
Ray Doba listed and sold the business
USA Car Care

Strong Traffic, Highly Visible Location, Competent and Certified Techs, High Marks for Customer Service, and High Customer Loyalty. This very attractive, money making auto-repair shop has everything, including valuable real estate and a good building with eight work bays plus attractive reception area and office. Although very successful, the current owner wants to pursue his other business interests.
The buyer, the owner of another auto-related business, looked at several businesses with us and closed the deal on this shop within seven months of working with us. He also purchased the property. The deal included bank financing.
Tom Pence listed and sold the business.
Seeking Sitters

This Internet membership fee-based franchise has a great reputation in the Katy/Sugar Land area! This franchise was built on a foundation of safety, for both sitters and members and offers an awesome online experience for both client and franchisee. The franchise performs thorough background screenings done through their in-house private investigation company on every sitter and member that applies. This business has been recognized as one of the Top 10 franchises every year since 2010. All clients are charged and sitters are paid through a 3rd party with the difference going to franchisee/business owner.
The buyer has a B.A. in Marine Engineering / Naval Architecture and a MBA and started a drafting and design business.
Marcia Bowron listed and sold the business
Ask The ExpertsQuestion Ask The Experts


I understand the risk of having revenue generated from only a few customers. What is the impact of supplier concentration on business value?
Concentration in the acquisition world is a bad word. Businesses with high supplier concentration attract fewer buyers and this lowers the price. What's too high? Having a supplier with 40% of your business is too high.

When buyers look at a company for sale, they look at risk. Supplier concentration is one of the top risk factors that are examined.

Why? Because if customers push the throttle, the suppliers furnish the gas. A company cannot sell its products to customers if it cannot secure what it needs from suppliers. Any adverse change in a company's relationships with its key suppliers, or loss of the supply of one of the company's key products, could have an adverse effect on the business. Therefore, the nature and stability of suppliers is an important consideration in identifying a company's risk.

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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