The Business Transfer Newsletter
February 2022
Selling Texas Companies Since 1974
Our monthly newsletters provide educational information about buying or selling a business, current economic conditions, and highlight some of our newest business-for-sale opportunities.

"The best library of articles about how to sell your business" 

~says The New York Times~

Get Rid of Excess Inventory to
Maximize Business Price
When selling a business, maintaining proper inventory levels is essential to maximizing value. Don't let poor inventory management drag down the value of your business.

Inventory is an ever-renewing, moving, and perishing thing. The longer it hangs around, the less valuable it gets, and eventually dies as a viable product. If it's not turning over fast enough, the inventory begins to stop-up cash flow and drain capital coffers. Inventory is a dollar-for-dollar part of the buying and selling process and buyers will make a close assessment of it prior to closing a deal.
10 Things It Takes To Buy A Business
No ten-point list can ever hope to supply you with every imaginable consideration when it comes to buying a business. The following factors – listed in no particular order – should be a good jumping-off point, but feel free to expand on them and dig even deeper to decide that the business you plan to buy is right for you.

1. Consider the History – Plan For the Future
Business price is typically based on historical factors – real estate prices, equipment and inventory value, the net earnings the business brings to the owner. By considering what you can do with the business once you took over should be a factor in determining whether it is a good buy. While future potential earnings is dependent on the efforts of the new owner, it is not usually a factor that is heavily weighted into the asking price of the business but can be the reason it is purchased and brings a price that is towards the higher end of the value range.

2. Look For a Solid Foundation
A business that has been shown to flourish despite past financial downturns is one worth considering. As the saying goes, “You can’t make a silk purse out of a sow’s ear.” This means that a weak company will hardly grow into a great one simply by making a few changes. With all the terrific opportunities out there, it hardly makes sense to buy a business simply because the price is right.

What is Seller’s Discretionary Earnings
Calculating SDE is a way to standardize or “normalize” a company’s earnings so it can be more accurately compared to the earnings of other companies and the industry as a whole.
If you own a small to mid-size business, it’s important to have a good understanding of Seller’s Discretionary Earnings or “SDE” and how its calculated.

By doing so, you’ll gain a better understanding of your business’ true earnings, an accurate picture of its value, and insight on things you can do to enhance its value as you move forward.

This blog fully explains what SDE is and how it’s calculated. and finish by showing a real world example of how you can recast your financials to calculate your SDE.

Finish by using a real world example of how you can recast your financials to calculate your SDE.



How to Buy a Business in 7 Steps >>>

Buying A Business?
Use A Due Diligence Checklist
Due Diligence is the last phase in the buying process. This is the time when you will have access to all of the company’s books, records and files. You will have a pre-determined period of time to investigate the information that you have been given so far to verify its accuracy.

The goal of an effective due diligence is to validate what the seller has represented and to allow you adequate time to review all of the other key issues of the business. The following is a checklist of information and documents that a buyer may wish to review during the due diligence period:

  • M&A and Business Brokerage Firm Since 1974
  • Historically, we have sold >60% of the businesses we listed vs. 25% Industry Average
  • Consistently sold businesses within 94.5% of appraised price
  • We specialize and are experts in the Greater Houston, Texas market
  • Closed approximately 3,000 business transactions in Texas
  • We are NOT a franchise
  • Authority on business transfer in our profession
  • Founding Members of the International Business Brokers Association (IBBA)
  • Founding Member of the Texas Association of Business Brokers (TABB)
Quick Links
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12141 Wickchester Lane, Suite 100
Houston, TX 77079
713-680-1200