A. One common fallacy is that individuals who sell a business, do so for some dubious reasons. Amongst the most common sited is:The business is failing, losing money and about to fold.

Obviously we sell many businesses at AR Business Brokers and the above reasons are most uncommon. We have to look at a business closely to assess its value. We advise our potential buyers to look at the accounts very closely and, if needed, we will go over the figures with a CPA. In all cases, we need to identify the net profit for our evaluation purposes. There are a number of ways that we can cross-check the figures to arrive at a reasonably accurate evaluation. Therefore, we must disclose every aspect of the company profile to the buyer.

Our associates work selected areas and frequently accumulate a wealth of information on the businesses they list. If the business is failing, losing money or overvalued we cannot represent it to a buyer in any other way. We are aware that many individuals come to us, who have never been in business before. We feel a responsibility to guide them and ensure their success. In fact many of the owners who are selling their businesses today, purchased them through us originally.

So what are the most common reasons for selling a business that we encounter?

• Retirement.
• Wanting to move to a bigger business.
• Wanting to move to a different geographic area.
• Burned out because of hours of work or the number of years running the business.
• Owners death or death of family member.
• Divorce.
• Bored. Wants to get involved in something else that he/she feels will give more meaning to his/her life .

Q. I was recently asked to pay an up-front fee by a company who said they would help me to buy a business. Is this OK and what should that fee be?

A. If your buying or selling a business their are several things to be aware of.

We have had several clients who have complained that they were charged up-front fees. This seems to be particularly common with our UK and European clients. If someone offers to sell your business in Florida on a commission basis he/she must be a licensed realtor, and is therefore bound by a code of ethics. But in some other states and other countries the requirement for licensure may not be required. Some Brokers charge appraisal or advertising fees up front. AR Brokers does not. We believe the basic rule as regards up front fees should be simply this:-

There shouldn't be any! Whatever you do, don’t pay up front fees!

Q. What is the most important figure to look at in assessing the worth of a business

A. We often have clients asking us what their business is worth. We frequently hear about strange formulas used to calculate the value of a business. Often these formula seem to involve gross income. For example, a client recently told us that his CPA had advised him that his business was worth 1.5 times the gross income. Since his yearly gross income was $800,000, he believed his business to be worth $1.2 million. The business had high labor and material costs, running at $650,000 p.a. So the real profit or net profit was $150,000 per year. Obviously, gross income is something that differs in every business, as do overheads or operating costs. Clearly, gross income cannot be used to calculate the businesses worth, and regardless of what other so called experts tell us, we can only use net profit or pre tax profit in any appraisal calculation. Some of our clients believe that their business is worth many times it’s actual worth, though a majority of our clients have underestimated the value of there business through disinformation.

There are other factors which can add to the value of a business, such as real-estate and yet other items such as having to replace specialist skills that can reduce the value of the business. Overall the appraisal process can be quite complex and that is why it is best to let professionals who are trained in this area assist you in the buying or selling process. Although Florida Realtors can sell a business and be paid a commission for this, their backgrounds are frequently not in business and few have experience in having run a business. All of AR Business Broker’s staff have backgrounds in business and have run their own business at one time or another. We offer a wealth of knowledge and experience to our clients throughout the entire process and often afterwards.

Q. Where is the business located, can you give me the address?

A. Until we have met with you and confirmed your commitment, it is very important that we protect the confidentiality of the seller. Therefore, although we can disclose a general geographic area on an initial inquiry, we cannot be specific as regards the name of the business and the address.

Q. Why is confidentiality so important?

A. Often, if it becomes known that a company is for sale, the associated speculation of employees and the public can have adverse affects on the business. Employees may be stressed and concerned over possible job losses and long term accounts may be lost as customer confidence falls. This is a situation that neither benefits seller nor buyer, and thus we make it our duty to keep such information confidential.