Is seller financing available?
Many times the seller will finance part of the transaction. The cleaner the financial statements and the stronger the business, the less likely the seller will finance part of the sale for the buyer. It certainly doesn’t hurt to ask.
Is the business financeable?
Banks are very interested in financing business acquisitions. If the business shows consistent earnings and has a positive cash flow, a bank will most likely finance the transaction. However, a buyer may need to talk to three or four SBA lenders to find the right deal.
What are the growth opportunities in this business?
Many times a buyer will recognize opportunities that the seller doesn’t or the seller recognizes opportunities but just can’t put the time and effort into it. Sellers are a good resource for recognizing trends and opportunities.
What does cash flow mean? What is EBITDA?
Cash flow is also known as seller discretionary earnings and net discretionary earnings. This is the company profit, plus owner salary, plus depreciation/amortization, plus interest expense, discretionary spending items like entertainment, one-time legal fees and others.
EBITDA is a term used most often in medium-to-large businesses. EBITDA means net Earnings-Before-Interest-Taxes-Depreciation-Amortization. This doesn’t include an owner’s salary and discretionary items.
Whether it’s Cash Flow or EBITDA, these numbers are typically the focus of debate and negotiation.
What kind of business would be right for me?
This is a personal decision. What are your interests, hobbies and passions? What are your strengths? Are you bored with what you’ve done in the past and need to do something different?
Why is the owner trying to sell the business?
There are many legitimate reasons why a successful business owner needs to sell. There are health issues, a spouse may have found a job in another city, kids require more time at home, burn-out, retirement and more.
Will key employees stay with the business?
There’s no reason for employees to leave unless the buyer wants to make a change. Buyers need to know if there are any key relationships or family relationships involved. Typically sellers won’t have disclosed to employees that the business is for sale.