Articles & Press

Selling Your Business? Follow These Ten Commandments to Avoid Wrecking the Deal

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  1. Place a reasonable price on your business. Since an inflated figure either turns off or slows down potential buyers, rely on your professional service provider to help you arrive at the best “win-win” price. Remember, a transaction will consummate only when a buyer and seller come to reasonable terms.
  1. Carry on “business as usual.” Don’t become so obsessed with the transaction that your attention wavers from day-to-day demands, affecting sales, costs, and profits. Since the selling process could take six to twelve months, the buyer needs to keep seeing a healthy business.
  1. Engage experts to insure confidentiality. A breach of confidentiality surrounding the sale of a business can change the course of the transaction. Professional intermediaries can channel the process and the parties involved to keep the sale within safely silent bounds.
  1. Prepare for the sale well in advance. Be sure your records are complete for at least several years back and do all pertinent legal or accounting “housecleaning”–as well as a literal sprucing-up of the plant or store.
  1. Anticipate information the buyer may request. Most buyers will require three years worth of financial data including tax returns. In order to obtain financing, the lender will require a business appraisal as well as a real estate appraisal including an environmental assessment (where real estate is concerned).
  1. Achieve leverage through buyer competition. This can be tricky; you are wise to create a competitive situation with buyers to strengthen your deal position. In actuality, one buyer is no buyer.  The sales process should stimulate multiple buyers with multiple offers.
  1. Be flexible. Remember the forgotten Beatitude: “Blessed are the flexible, for they shall never get bent out of shape.” Don’t be the kind of seller who wants all-cash at the closing, or who won’t accept any contingent payments or an asset transaction. Depend on the advice of your professional service providers–their knowledge of financing and tax implications– to keep the deal sweet instead of sour.
  1. Negotiate; don’t “dominate.” You’re used to being your own boss, but be prepared to learn that the buyer may be used to having his/her way, too. With your consultant’s help, decide ahead of time when “to hold” and when “to fold.”
  1. Keep time from dragging down the deal. Time kills all deals. To keep the momentum up, work with your intermediary to be sure that potential buyers stay on a time schedule and that offers move in a timely fashion.
10. Be willing to stay involved. Even if you are feeling burnt-out, realize that the buyer may want you to stay within arm’s reach for a while.  Most transactions will require the seller to assist in transitioning for up to 90 days — sometimes longer.  Determine in advance how you can best affect a smooth transition.

The House or Your Business… The Selling Tactics are Similar

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Throughout my life I’ve seen many different articles on owning your own home. The statistics show that Americans change homes once in every 7 years on average. What fascinates me is not the “how” of this change, but the “why”. It appears that for your typical American, a change of residence is made not because it is necessary, but simply because they can. With the right financial situation, change can make their life better or simply supply a change to keep things interesting in their life. I’ve discovered that there are parallels between this mindset and business ownership. There is a new standard for business in which a founder may start one company, take it to its potential and then sell and move on to bigger and brighter opportunities. Why do they do this? For the same reasons as homeowners: they have all of the tools they need, the potential is there and the time is right.


It is a blessing to live in a place flavored by capitalism. It’s our choice to purchase or to sell. Just as with real estate, companies are bought by a large variety of purchasers. If you’re searching for an upscale penthouse, or a humble cottage, you have a world of options. In business nowadays, the same mentality exists and flourishes. From a world-wide franchise to a mom-and-pop eatery, you can have your pick at the business buffet. The real challenge is not for buyers but for sellers. Similar to real estate, sellers of businesses must groom and nit-pick their product so that it sells at its potential. The selling points of business are found in potential profit immediately and in the future, absence of heavy competition, the industry wherein it resides, and the possibility of capital growth.

The Right Time

It would be a dream to make a good sale on your house during a period of heavy competition, with an upbeat economy, and rates of interest that have never been lower. You can’t always tell the tide when it’s allowed to roll in, but you sure can jockey for a position that takes best advantage when the moment comes. How? By patiently waiting to sell until the year end operating data shows great bounds in company profits. Or by waiting to show that new changes you’ve implemented increase company profits. Or by reducing potentially negative factors like low morale or unpaid liabilities before making the move to sell.

Seek Assistance

Selling a house or a business are two of the most important deals you can make. In either scenario professional assistance is shown to greatly improve outcomes in terms of profit maximization and migraine minimization. Just like you would never dream of performing open-heart surgery on yourself, utilize an available and knowledgeable group of business professionals (CPA, Lawyer, Business Broker) to get your deal done right.

Owners of companies are more alike with homeowners then they may realize. They are both constantly vending a very important product in two very similar markets. Some for a change of pace, others are ready to retire, and others for reasons known only to them. At the end of the day everyone should maximize results in their sales opportunities. Why? Because they can, and it’s what we do here in America.

Evaluating Business Acquisitions Through Profitability

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Comparability in businesses is virtually an oxymoron. Every business is different, including franchised businesses. Having owned a franchise personally, I can tell you that although our services were the same as other franchisees, our employees, our clients and our profitability were certainly unique.

As you evaluate various businesses for the purpose of acquisition, although there is recognized differentiation, still there should be consistency in how profitability of businesses is calculated. Using a homogeneous method of profitability comparison, will allow you to fairly judge the value of businesses, despite their differentiation.

The comparability standard we use in general terms is: Total Owner’s Discretionary Cashflow. Specifically, we use EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), adjusted by owners discretionary expenses. If you are not familiar with the term EBITDA, don’t worry, any financial adviser you employ in the due diligence process will be. Effectively you are evaluating the business profit on a pre-tax, pre-interest, pre-depreciation and amortization basis. Add to that the owner’s salary and other non-business essential perks and you have a picture of the business’s “Total Owner’s Discretionary Cashflow”.

Having arrived at the discretionary cashflow figure, you can then calculate your own personal financing costs to acquire the business, plus any capital requirements you forecast the business to need (i.e. additional equipment and inventory, or capital for growth purposes). Going through the above exercise on all businesses you evaluate will allow you fair comparability across various industries.

Profit alone however, is not the sole indicator of total value. Although profit is typically the focal point of what buyers are looking for, the income statement analysis should be accompanied by an analysis of the balance sheet. Given comparable discretionary cashflow, a balance sheet with substantially more assets will attract higher value. Why? The buyer will have more tangible assets to continue running and growing the business, and any lenders used in the acquisition process will be happier to lend with a stronger asset base.

What are owner’s discretionary expenses? Basically any expense that is not required to operate the business is a discretionary expense and should be added back to the cashflow of the business. Examples of discretionary expenses would include personal vehicles, personal travel and other entertainment that are non-business related. We’ve seen everything from the building of a vacation home in Belize to girlfriends in Las Vegas that ended up as ‘business” expenses. It’s important to weed out the discretionary, from the truly legitimate business expenses, in order to fairly understand the full profitability of a business.


-Bradley G. Marlor MBA, CBI is a Managing Partner at Utah Business Consultants and a Certified Business Intermediary with the International Business Brokers Association. Utah Business Consultants is a full-service Business Brokerage and Valuation firm.

Should I Buy a Business that has Customer Concentration?

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Over the years we have been engaged with a healthy number of businesses vexed by customer concentration. We have seen many more we elected not to represent. Those we elected to pass on had concentration issues with little to no defensible position relating to concentration. One letter from a concentrated customer ending its relationship and the company would be toast. The final answer of whether or not to acquire a business with customer concentration should be prefaced with answers to the following questions:

1) How deep is the customer concentration? In selected industries, concentration of 10% or more might be considered high. However, generally 20% or more concentration should be cause for concern. If a customer generating revenues of 20% or more is suddenly lost, unless immediately replaced, it would have a serious to devastating impact to the bottom line. Concentration over 50% should be dismissed as an unacceptable target unless very unusual circumstances exist.

2) How easily can the customer leave? If the business servicing the customer has proprietary assets – – tangible or intangible, it can make a big difference. Simply having a “good relationship” with a customer is not enough. Differences in pricing can quickly change the mind of a customer; there is little security in a longstanding relationship where pricing is concerned.

3) What are the gross and net margins of the company? This question should be obvious. The higher the margins, the higher the degree of comfort should exist in the target company given higher levels of customer concentration. Higher margins may be indicative of proprietary products or services that allow the target company to operate very profitably. It may also indicate the targets ability to quickly replace lost clients.

4) One final question is whether the business can expand out of the concentration issue? In other words, can the business continue to grow, thus diluting the concentrated customer? Most business owners don’t want to lose their golden customer, but instead of growing the rest of their customer base (including new customers) they allow the concentrated customer to absorb more and more of their products or services.

Customer concentration can transform an otherwise profitable, successful company to an unattractive target. Buyers should be careful of courting a concentrated target company; sellers should start today on diluting in order to strengthen marketability.


–Bradley G. Marlor MBA, CBI is a Managing Partner at Utah Business Consultants and a Certified Business Intermediary with the International Business Brokers Association. Utah Business Consultants is a full-service Business Brokerage and Valuation firm.

It’s Better To “Cash-Out” Than To “Burnout.”

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Burnout can come with a business that’s successful as well as one that’s failing to grow.  The right time to sell is before the syndrome becomes a threat to the effective management of a business. What are the warning signs of burnout?

That isolated feeling. The burnt-out owner has been “chief cook and bottle washer” for such an extended period of time, that even routine acts of decision-making and action-taking seem like Herculean tasks. These owners have been shouldering the burdens alone too long.

Fuzzy perspective.  Burnt-out owners are so close to their work that they lose perspective. Prioritizing becomes a major daily challenge, and problem-solving sometimes goes no further than the application of business Band-Aids that cost money in the long run rather than increase profits.

No more fun. Of course, owning a business is hard work, but it should also include an element of enjoyment. The owner who drags himself or herself through every day, with a sense of dread–or boredom–should consider moving on to a fresh challenge elsewhere.

Just plain tired. Simply put, many business owners burn out from the demands placed on them to keep their companies operating day after day, year after year. The schedule is not for everyone; in fact, statistics show that it’s hardly for anyone, long-term.

The important point here is for business owners to recognize the signs and take action before burnout begins to hinder the growth–or sheer survival–of the business. Many of today’s independent business owners feel they’ve worked hard, made their money and sense that now is a good time to “cash-out” and move on.

By:  Bradley G. Marlor MBA, CBI

Utah Business Consultants

Weighing Your Options: Buying vs. Starting a Business

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So you’ve been in Corporate America too long; you can no longer stomach the grind, the stress, and the hours.  You’ve been padding your corporation’s pocket, yet your pockets are seemingly empty.  Something has to change.  You realize that changing companies might provide a different view, but what you really yearn for is a whole new landscape, the ability to create and mold your environment to your own advantage.  And you want to feel duly compensated for the brainstorms, the headaches, and the emotional wear and tear. What are you waiting for? You have the skills, why not start your own business?

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Business Value Maximization

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Vision is important in any company, large or small. If you have no idea of your end goal, the beginning of your business is likely to take off in the wrong direction. If you haven’t considered how you are going to exit your company in the future, you should – now.

The journey to value maximization commences with the starting transaction. Confidence in your business progression comes with forward-thinking strategies and a solid understanding of the sales process. The following are several crucial steps to establish that understanding.

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Are There Any Good Businesses To Buy?

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Here are some responses to that question:

First: The Small Business Administration reports there are over 5.7 million businesses in the U.S. with at least one employee other than the owner. Formal and informal surveys indicate that approximately 20% of all businesses are for sale. For many reasons, of the 1.1 million businesses that are for sale, about 20% of those will actually transact a deal. On the Utah front, the Utah State Department of Commerce reports about 170,000 total businesses. Extrapolating, there are close to 34,000 businesses for sale in Utah. Not all businesses are “openly” on the market; business brokers, others by owner, represent many.  However, you do the math, at any given time there is an impressive number of businesses on the market. …Read More!