Introduction to Due Diligence: How to Evaluate the True Worth of a Business: Due Diligence 101 or What You Don’t Know Can Kill You!

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This article is written as a general discussion on the subject of Due Diligence and how to evaluate a small business for purchase. It is for informational purposes and not intended to be a definitive guideline for your exact situation. You should consult the appropriate professionals with regards to your specific transaction or situation. Further, this article is in no way advocating, suggesting or implying that anyone engages in any type fraudulent activities whatsoever. These are simply things a buyer should be aware of when doing Due Diligence in buying a business. Read more

Business Appraisal Pitfalls: How to Evaluate the True Worth of a Business:The Differences between a Busines

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It has been said that you cannot judge a man until you have walked a mile in his shoes. Over the years I have done all four functions when someone asked me to help them.

But since setting up Due Diligence Assistance for buyers six months ago I have gained a whole new respect for what knowledgeable CPAs have to work with when assisting their clients in buying a business. With very limited information they must determine if the books are cooked (false and incomplete) and if they are, by what amount.

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Florist Business Due Diligence

Business Buying Horror Story: Floral Wholesale – The Seller Misrepresented Everything

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Florist Business Due Diligence

Floral Wholesale – Riverside, California:  Some months ago a San Diego Police Officer in the process of purchasing a business (for his wife) retained Due Diligence expert Willard Michlin of Southern, California to assist him in determining if the seller of Floral Wholesale was accurately representing the profitability of the business.  The asking price for the business was $350,000.  The Listing Agent and the Seller represented that the business was clearing a $130,000 profit.

Mr. Michlin, within three hours of visiting the business determined that the business was making no more than $15,000 per year and even that number was based on documents being incorrectly reported to taxing agencies. Read more

How to Sell a Web-based Business Quickly and for Top Dollar

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E-commerce is it right for you?

There is a lot of interest to purchase e-commerce or web based businesses. I have been getting more than a normal amount of calls from buyers who are very interested in this area. After reviewing hundreds of financials, I can see where this area looks very attractive. It is only because I have done due diligence and appraisals on e-commerce and  youtube.com based businesses, that I understand why even though the buyers want to buy and the sellers want to sell that no deal is struck. The two sides do not understand each other. Let me try and shed some light on the problem. Read more

Two things you need to know before you buy an e-commerce business

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Make sure you have all the Paper Work you need before you Hire Someone to Do Due Diligence

In my years of doing due diligence for business buyers, the biggest complaint received from buyers is that the information presented on the web, or by the listing broker, does not match up with the information received from the seller after a deal has been negotiated.  Read more

Who Can You Trust to Loan Money To?

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True Story:

Glynn was a nice guy who was given $500,000 by his mother to buy a business, since his photography business went into the toilet. The money was burning a hole in Glynn’s pocket.

One evening Glynn met Joe at a local networking group. They started spending time together and became casual friends. Joe told Glynn he was an entrepreneur who owned different successful business in town. At least that is what he said.

One day, Joe told Glynn that he was opening a taco restaurant with two experienced restaurant partners. The business needed a taco machine with cost $10,000 and Joe was tight on cash. He asked Glynn to make a loan, secured by the taco machine. He would pay 10% interest-only payments for one year. Read more

Business Fraud

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Are your employees stealing from you? That is a form of business fraud.

If you own a business, of any size, did you ever consider that while you are working hard to make a living to support your family and staff, there are those that are also working very hard against your actions. Read more

Business Sale Price Pitfalls: Should you knowingly overpay for a business?

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 I remember growing up hearing from sellers the following sales pitch for why I should pay them top dollar. “You can get fresh oats for a fair price or you can get oats that have gone through the cow for a lot cheaper.” The other one I heard was “Quality remains long after price is forgotten.” After 20 years of being a business broker, I have heard every justification in the world for why this owner’s business is special and deserves a price at top market. Read more

The 6 Key Items Influencing a Company’s Value with Two Working Owners

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The key issues that influence a company’s value when there are two working owners:

1.    What is the profit level of the business after allowing for the second partner’s salary Sellers Discretionary Earnings (SDE)?

2.    Do a few customers dominate the sales?  I see some great companies where one customer is over 50% of the sales volume. In this case if the biggest single customer left, the company’s value would collapse? Read more

Fast Food Business Ownership: Making a Fast Food Business So That It Virtually Prints Money

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  Fully half of all the businesses that are sold are retail food storefronts. This includes franchise, non-franchise, sandwich shops, bagel shops, coffee shops, as well as good old fashioned sit-down restaurants. Half!

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