Category: Business Broker

04- Sep2015
Posted By: Joe Alvarez
290 Views

Business ownership: A Going Concern or Start from Scratch ?

Previously we were discussing, not whether to go into business, but the decision of which method made sense for you. A chicken or egg scenario. Do you start from scratch with just an egg? An idea that has yet to hatch but holds great promise or do you purchase some chickens, a going concern that is producing revenue and , hopefully, income.

Under the egg method you must have time. Time to weather the delays of a startup; the lack of customers, employees, revenues and spendable income. In fact the reality is you will most likely go deeper in the debt hole having no personal income for many months if not years. Do you have that kind of staying power (reserves)? Investors, if you can find any, will not allow you to spend their money on your living cost. So for sake of analysis let?s examine which is better, the chicken or the egg.

Your egg has a cost obviously much less than buying a group of chickens. But it does not produce current income. Let?s say you have spent $50k on your egg (idea) so far. Even when it hatches you?ll have to build up your ?coup? of chickens letting other eggs hatch not taking income while this process build. You now have another $200k sunk into your business and / or debt from living expenses.

At $250k you could have bought a chicken farm, a revenue producing enterprise. You?d have debt but also income. You?d be buying a proven business because you did your due diligence and know the stream of revenue the business has been producing. You might have to spend a few dollars for sprucing up the business; perhaps a new marketing campaign but you have INCOME!

But my egg is a fantastic idea. Could be, I hope so. BUT 75% of all new businesses fail by or before year 3 and 85% by year 5. Risky?? You bet! Still want to be in business? Good. We?ll discuss alternative ways to make that happen while lowering the risk next.

Steve Ivey

24- Aug2015
Posted By: Tim Ajayi
257 Views

Keep it Confidential: When Selling your Business

Confidentiality when selling your business

confidentiality - Selling your business

The best way to relate to a situation is imagining you are there. If I were in a job, everything is going well, and then, rumor has it the company is on sale. The first thing it would come to my mind would be, what?s going to happen to my job? Should I start looking for a new one?

When selling a business the best is to do it discreetly for many?reasons:

News that your business is for sale can generate negative reactions among your employees, customers, suppliers, creditors and bankers.

As an employee, I believe this would lower the morale and make others nervous affecting productivity and customer service. Your competitors can get predatory and spread the word. It opens the door for them to steal business from you.

You, as a business owner, want to protect your business at all costs. Whatever is the reason for you selling your business, it is imperative to be discreet. Hiring a business broker can be beneficial when it comes to selling your business while keeping a low profile.?? They can list your business for sale while at the same time protecting the identity of your company.

A business broker uses a document called a Blind Profile, a document describing the company without revealing its identity.? In the case of a buyer showing up, he must sign a confidentiality agreement to have access to any sensitive information, protecting you and your business.

You as a business owner should focus on running your business even if it?s on sale. A business broker is an intermediator who will help you to run the process smoothly from beginning to end.

 

NewGate Capital Partners can help you sell your business.?Contact us anytime at?http://www.newgatecapitalpartners.com/business-brokerage/

 

 

13- Aug2015
Posted By: Tim Ajayi
298 Views

Why Hiring a Business Broker when Selling your Business is a Wise Idea

 

     

     

    Selling your business adFor starters, a broker is an independent agent whose main responsibility is to bring sellers and buyers together.? For example, if you hire a real estate broker to sell your house, the broker acts as a middleman, he doesn?t own the house, and he instead facilitates the transaction.? Just like with a house if you have a business, you as an owner can sell it yourself. However, there are many reasons why you should consider hiring a business broker:

    • Paperwork: Do you know how much paperwork you will need if you are selling? According to the Small Business Administration SBA you need to prepare a sales agreement. What else? You can invest your time doing the research on your own? OR consult a business broker. A business broker?s expertise consists of navigating through extensive paperwork and the formalities in a daily basis. Don?t forget that time is money!
    • Business Continuity: Selling a business is a full-time job as it is. The owner should maintain its focus on running the business and take it to its full potential. All of these while selling.
    • Confidentiality: If you are an owner and are selling your business how you keep the matter confidential from employees and other stakeholders. You don?t want anyone to panic. The situation can be disruptive to the normal operations of your business. If you choose a business broker, he can protect the identity of your company while on sale. They can use a blind profile, a document describing the company without revealing its identity. We are going to talk further about ?Confidentiality when selling a business? in our next blog.
    • Valuation Knowledge: Brokers can help you determine the value of your business. They have access to tools such as business transactions databases. There are also other variables that affect the value of your business. A broker can guide you in the right direction in to calculate the accurate value of your business.
    • Marketing: business brokers can help you market your business. They can suggest you diverse ways to advertise and put your business out there.?

    Ultimately, the decision is yours, you should take in account the variables of time, money and resources and put on?a balance and see what works better for you and your business.?

    New Gate Capital Partners is here to answer your questions, we can help you to sell your business. ?Feel free to check out our?business brokerage page.

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06- Aug2015
Posted By: Tim Ajayi
241 Views

Thinking of Selling your Business

You are contemplating selling your business and don?t know where to start.

We suggest asking yourself some basic questions, start from there, and then talk with your trusted accountant and/or attorney.

 

 

The main question of all: Should I sell my business?confused about selling your business?

 

– What are the reasons you are selling?

-Why are you selling your business?
– Is my business ready to sell?
– Is the business profitable?
– What type of professionals do I need in my team?
– Are the current market conditions right?
– What?s the paperwork?
– What about taxes?

 

These are just a few of several questions you may have and that you need answers before selling a business.

Selling your business may be a daunting journey but it doesn’t have to be scary. You can have many reasons why you are considering selling, it may be burnout, retirement, health, it?s time to pursue other passions or you are leading a different direction in your life. Whatever it may be, NewGate Capital partners are here to assist you in the process. For us, each potential new client means the opportunity to provide something exceptional, focusing on important things like performance, integrity, and trust.
We are a team of Florida business brokers ready to assist you in selling your business. If you have more questions about how to sell a business, feel free to contact us anytime at http://www.newgatecapitalpartners.com/business-brokerage/

Recommended article:
Thinking of Selling Your Company? 8 Things to Consider First

15- Jul2015
Posted By: Joe Alvarez
258 Views

So You Want to be in Business, Be an Owner, Master of your Own Destiny?

I love the way my partner, Steve, goes about explaining this.

 

Chicken or the Egg

So you want to be in business, be an owner, master of your own destiny?

The age old question in the title might be worth thinking about. Should you do a start-up with an egg or should you buy some chickens? A silly analogy? ?Maybe not.

Many people dream of starting a venture. I?ve helped several hundred wanna- be- entrepreneurs work through this process. Many come in with the egg in hand, delicate, carefully guarded and full of promise. Perhaps they?ve decorated the egg to make it look more attractive and more advanced than other eggs. Convinced that their egg is unique yet they really aren?t quite sure what it will be when it hatches. ?They rarely consider that it may not hatch at all. After a time of incubation where you?ve kept it warm and looked at it all hours of the night maybe even added a few more colors to it, it hatches.

You have a chick! They are furry, loud and ready to be fed. It was a chicken after all and you are very proud of this new creature, you probably give it a name even though you can?t tell whether it?s male or female (which is very difficult in young chicks). A few days later you realize that you?ll need another egg or have to buy another chicken to mate with yours or your precious egg, after lots of feed and care, will have provided you with 1-chicken dinner and be gone. Your great idea didn?t produce much and you really were never in business.

Of course you are smarter than that so you had several eggs or a partner who also had an egg that was compatible with your egg, Hmm, more about that another time. The point or question is: Did you save time or resources by starting with the egg versus buying some chickens. Both actions will get you to the same place. You thought the egg route would be simpler and cheaper. Let?s explore that.

 

Steve Ivey

Partner

NewGate Capital

28- Jan2014
Posted By: Brett Andrews
255 Views

Why EBITDA is Not Cash Flow

Why EBITDA is Not Cash Flow

on?January 28, 2014?by?Cody Boyte

 

There is often a misconception that EBITDA is synonymous with cash flow. While most seasoned deal professionals are careful to remember the distinction, some company owners (or entry-level analysts) can benefit from a friendly reminder.

The EBITDA metric gained prominence with the arrival of the?LBO?industry in the 1980?s, as buyout firms used it to estimate how much debt a company could take on, a key component of the LBO strategy. While EBITDA has become standard in company valuation ? purchase prices and loan covenants are often quoted as multiples of EBITDA ? the metric is not uniformly defined under GAAP standards and its calculation varies from company to company. This variation can lead to disparities and misunderstandings about the true cash-generative abilities of a business.

EBITDA does not take into account any capital expenditures, working capital requirements, current debt payments, taxes, or other fixed costs which analysts and buyers should not ignore. The cash needed to finance these obligations is a reality if the business wishes to grow, defend its position, and maintain its operating profitability.

Here are three costs that are not included in the EBITDA calculation, and their omission tends to overstate operating cash flows:

Capital Expenditures

Certain industries like heavy manufacturing, shipping, aviation, telecom, clean technology and oil and gas require heavy ongoing or up front investments in equipment. EBITDA does not take into account capex, the line item that represents these significant investments in plant and equipment.?Ignoring capital expenses to inflate EBITDA by $3.8B precipitated the bankruptcy of WorldCom. Essentially, the company capitalized operating expenses, allowing them to be depreciated over time, thus decreasing operating expenses and boosting EBITDA.

Depreciation

?The biggest problem I encounter is an over or underestimation of capital expenses for asset-heavy companies such as trucking. Adding back all depreciation for a company like this without leaving an allowance for capex can grossly overestimate the available cash flow. However, not adding back any depreciation can underestimate the cash flow, especially if the company uses accelerated depreciation,? advises Axial Member?Jaime Schell?of?Plethora Businesses. There have been more insidious cases of companies manipulating depreciation schedules to inflate EBITDA, such as?Waste Management in the mid-nineties extending the useful lives of its garbage trucks and overstating their salvage value.

Working Capital Adjustments

Businesses need to invest revenue back into the company to keep expanding. EBITDA does not account for changes in?working capital?and the cash required to run the daily operating activities. Ignoring working capital requirements assumes that a business gets paid before it sells its products. Very few companies operate this way. Most businesses provide a service and get paid in arrears. Ideally a business collects up front for its services and pays in as much time as possible to remain as liquid as possible and to quickly reinvest cash into profitable investments like inventory purchases. This relationship between sources and uses of cash speaks to a company?s ability to take on more projects such as higher debt payments in the case of an LBO.

While EBITDA is useful in that it allows for a back-of-the-envelope comparison of two companies with similar business models or in the same industry, a?2000 letter to Berkshire Hathaway shareholders written by Warren Buffet?put EBITDA in its place: ?References to EBITDA make us shudder?We?re very suspicious of accounting methodology that is vague or unclear, since too often that means management wishes to hide something.?

David Simmons at Forbes magazine once called EBITDA the ?device of choice to pep up earnings announcements.? It does not exist in a vacuum and is irrelevant on a standalone basis. It does help when comparing similar companies under time constraints, but is by no means a thorough valuation tool when making an important investment decision.

 

compliments of?http://www.axial.net/