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Factors Affecting the Salability Of A Business

Factors Affecting the Salability Of A Business

  1. Financial Results – Absolute value and trend of sales, margins, wages/payroll/occupancy costs, net, supportable seller’s discretionary earnings (“SDE”), working capital requirements.
  2. Barriers to Entry
  3. Customers – Loyalty, quality, concentration, industry & geography, diversification
  4. Products and Services Offered – Variety, mix, pricing leverage, intellectual property content, brand names
  5. Productivity & Efficiency – Employees, computer & software releases, web site, point of sale system
  6. Industry Cyclicality & Seasonality
  7. Years in Business
  8. The General Economy – U.S. and local
  9. Willingness to carry a Seller’s Note – An all cash price is typically discounted by 20%+
  10. Scalability/Upside Potential and required additional investment, effort and risk required
  11. Business After Sale Issues – Pre-paid services, warranty exposure, returns, employee commitments, equipment leases and other liabilities to be assumed
  12. Competitive Threats – China, internet, home based, franchises, industry leaders
  13. Facility Lease – Rate vs. Market, term, renewal options, landlord reasonableness
  14. Employee Census – Years of service, age, pay rates vs. market, relatives, skill sets/licensing/certification pending retirements, worker’s compensation mod rate, unionization
  15. License Requirements & Regulatory Issues
  16. Vendor relationships, and pricing commitments & leverage
  17. Facility and Equipment – Age, condition, productivity, replacement cycle, work flow, capacity, technology
  18. Specific Location and Area Socio Economic Trend – A key success factor for some businesses
  19. Marketability, demand, and availability of buyers with the necessary financial resources & experience
  20. After-Sale Issues – Training/mentoring, consulting availability, non-compete risk, etc
  21. If applicable, Third Party requirements of franchisor, dealer, landlord, SBA, and others