Some people say that buying an existing business can be a shortcut to success. While that may be true, you should work with an experienced Sacramento business valuation consultant to help you make a wise decision, so that you can bypass some of the stressful and backbreaking efforts involved with building a business from scratch and go straight into the ownership and operation of a thriving company.
If you are working with an experienced business valuation consultant, the two of you can get a feel for the business by reviewing the research that your consultant has conducted: he’ll discover the reasons why the current owner is selling, the outlook for your industry and specifically this business, and the business’ stature within the community and the industry. In addition, you should review each of these areas:
Financial statements
Take a closer look at the company’s audited financial statements for the past three years and the same period of tax returns. Have your business valuation consultant review them with you. Your business valuation consultant will help you see beyond the numbers to try to determine the reasons for trends.
Accounts receivable
Review the company’s accounts receivable and see what’s sitting out there as past due and by how much. Get a list of the company’s current debts and see if there are any liens against them.
Any legal issues
Along with looking for liens, ask if there are any current or past litigation. Have your attorney review the company’s current contracts. See if they have all of the proper licenses, permits, and certifications, and whether they can be transferred.
Review the value of the company’s assets, both tangible and intangible
Along with your business valuation consultant, see what tangible assets there are, like equipment, property, and company vehicles. Intangible assets can be patents, copyrights, and trademarks, as well as the goodwill of the business and its reputation in the market.
Vendor and employee relationships
Although relationships vital assets of a business, they can be extremely hard to transfer to a new owner. Do some digging and see with which suppliers and vendors the company works and their current arrangements. See if they’ll work with you on the same terms if you’ll have to negotiate altogether new contracts. Within the company, ask about relationships with employees, and ask whether they’re likely to stay when the company is sold. Run down all of the salaries, benefits, and other HR costs with your business valuation consultant to see how these numbers look when compared to industry and local averages.
There’s a lot to ask when you’re buying a business. Working with a qualified business broker will pay dividends. Your business valuation consultant will help you review the documents and make a wise decision that will build your business for the future.
To discuss business buying opportunities in the Sacramento area, please visit our website and choose from the drop-down menu the information you’d like.
Grow Through Business Acquisitions With Real Estate in California
No real secrets to buying a business. Running your own company lets you lead an organization, make impactful decisions, and enjoy the flexibility that allows you to work in a way that best fits your needs. By purchasing an enduringly profitable, slowly growing firm, you can combine the opportunity for professional independence with the stability of buying an established and profitable small business.
You’ll have many questions to ask when you’re buying a business. Working with a qualified business broker in California will pay dividends. Your business valuation consultant will help you review the documents, the business climate, and the industry so that you make a wise decision that will build your business for the future.
There is simply no “one size fits all” approach whether selling or acquiring a business with real estate. Here are some other factors to consider.
- Some California business owners that also own the Real Estate, simply prefer to keep the Real Estate and offer a lease to the buyer of the business. If a decision has been made to sell the business, before a final decision is made about whether to also offer the commercial property for sale or not, the following are important items to consider.
- How critical is the Real Estate to the operation of the business? For example, if the business is a gas station or a car wash built on the Real Estate the business operates from, it may be hard to sell just the business and offer a lease to a buyer. This is because the business cannot easily and readily be moved
- Is the Real Estate just land or does it include buildings or structures on the Real Estate? If it includes buildings or structures, are they in good condition or do they need repairs and maintenance? If repairs and maintenance are required, is the seller willing to pay those costs so the buildings and structures are brought up to date and the latest building code?
- The buyer will probably want a lease for the Real Estate. If the buyer wanted a three- or five-year lease with options but only stayed for the initial lease and then left, would the Real Estate owner easily find a replacement tenant? If the buyer is getting an SBA loan, they will require a lease to match the length of the loan which is typically 10 years.
- Has the owner or seller of the business been allocating an amount for rent and is this amount a market rate or the amount the owner of the Real Estate is willing to accept as rent? If there is no rent allocation or the rent is below the market rate and the buyer has to pay a higher rent, it will lower the value of the business as expenses are higher.
- This also applies if the owner of the business has not been paying the property taxes, building insurance, or maintenance of the Real Estate and now expects the buyer of the business and Real Estate to cover these costs.
- Are there any environmental issues on, or near the real state? If so, this may lower the value of the Real Estate and the business.
- When was the last time that local zoning ordinances were checked so if the Real Estate is put on the market, it is ‘smooth sailing’ to close the sale?
- Related to local zoning ordinances are local Use requirements typically defined at the municipality level.
- Is the Real Estate part of a flood zone?
- Sample report of California Commercial Real Estate with basic property overview, environment, building, value, and more.
- Sample report of California Commercial Real Estate with climate check including flood, fire, storm, heat, and more.
- Sample report of California Commercial Real Estate property of the environment with regulatory summary and neighborhood.
- Sample report of California Commercial Real Estate flood certificate.
- Sample report of California Commercial Real Estate with property condition report, site summary, building summary, hazard risks, and more.
- Sample report of California Commercial Real Estate estimate of value.
How to Sell a Commercial Property Fast with a Business in California?
Are you looking to sell your commercial property and business in California?
A crucial first step is to get an accurate business valuation.
This is not only important for you as the seller, but also for potential buyers and lenders if the buyer needs financing.
FOR MORE INFORMATION CLICK EACH LINK BELOW
Other Commercial Real Estate topics to consider.
