Below are a few frequently asked questions that will prove especially useful for commercial and business brokerage clients. If you are a residential brokerage client and would like additional information about buying or selling your home, click the link to the 'Residential' page.

Is the broker a full-time professional?

When selecting a broker it is important to find one you like and trust. Ask about their education and experience. Ask the broker for references and call those references. Ask the broker about their professional affiliations and designations. Visit the office and see if it is what you expect - a professional environment backed with all of the necessary marketing and sales resources.

How do they arrive at a valuation of your business?

There is no simple method. But to approximate the value of your business, you should consider both its assets and earning power. The earning power of a business is defined as the annual pretax earnings plus owner's salary and perks added back, which determines the real earning power or the Seller's Discretionary Earnings (SDE). In some evaluation methodologies (Excess Earnings Method) this SDE has a manager salary, economic depreciation, return on working capital and return on operating assets deducted, then the balance is divided by the appropriate capitalization rate (usually in the 15 to 30 percent range) before adding back working capital to determine the value of a business. Other valuation methodologies (Multiple of Discretionary Earnings Method) multiply the SDE by a risk number (multiplier) to determine value. Our brokers typically use both types of methodologies to value a business. Also, market-based data (comps) can be used in conjunction with an SDE methodology so that they can serve as a "reality check." Most buyers and lenders place extensive weight on the company's ability to generate earnings. Therefore, it makes sense to use earnings methodologies to determine the value of a business and then use market-based data to check the reality of the value. As with most things in life, demand and asset value will also influence the business value. Desirable businesses and businesses with a large asset value command a premium. In the final analysis, however, the price tag on the business is your decision.

Does the broker have an active database of buyers?

Successful business brokers enjoy a large "queue" of buyers. Find out if your broker has buyers looking to purchase a property or business like yours. Often, approximately 50% of our buyers come from the "queue" of buyers in the various broker's databases. You'll have a better chance of selling if the broker already has buyers looking to buy.

Does the broker have a large number of properties for sale?

A large number of properties and businesses for sale attracts a large number of buyers. Ask how many properties or businesses your broker's office has for sale. For example, one of the best tools to promote the sale of a business is similar businesses for sale. A good business broker should be able to expose your property to a large pool of potential buyers.

How accessible is the broker once you agree to let him/her sell your property or business?

The lines of communication should always be open. The broker is representing you and acting on your behalf and should be available for consultation as required. It's reasonable to expect that your broker will return messages or emails promptly and that you will be given regular updates. It is good to inquire about a broker's responsivness when talking to references.

How many buyer prospects will you typically talk to in selling my property?

A good broker keeps detailed records of every active prospective buyer that has passed through their screening process. Ask to see some samples of the broker's buyer database files. These files will show how many buyers visited other properties your broker has for sale. These records should include the prospect's financial status and the kind of property each is looking to buy in terms of type, size, geographic area, etc. A successful broker will have prospects ready as soon as you list your company.

Does your broker have a highly effective website?

In today's global marketplace, prospective buyers are no longer limited to a small geographical area. A buyer for your business could come from anywhere in the world, if your broker has an effective website and it is easy to find. The Internet is a powerful marketing tool. Check out your broker's website. Is it easy to find? Is it easy to use? Does it project an efficient, professional image?

Is your broker licensed?

Some states, like Georgia, require business brokers to have real estate licenses. Why? A real estate license forces the broker to understand the laws of agency and understand his/her fiduciary duty to you. Also, real estate is often included with the sale of a business. If your broker is marketing a property for you, the law requires that they possess a real estate license.


WHAT IS YOUR BUSINESS WORTH

Every business owner wonders what their business is worth. Contact Us for a no obligation estimate of the value of your business.

When you work with a Real Estate Intermediary to develop a valuation report, the goal is a simple one, the creation of an accurate and comprehensive document that will stand up to scrutiny. You will receive a professional business valuation that becomes the best tool to obtain maximum selling price. Without a professional valuation, a business owner must be prepared to defend his opinion of value. Tiffany's depth of experience coupled with a vast knowledge of valuation will result in an expert opinion of value, delivered in a responsive, timely and efficient manner. Our brokerage has valued and sold virtually every type of business.

Small and mid-sized businesses typically depend on four key value factors:
• Seller's Discretionary Earnings (SDE)
• Risk
• Terms of the Sale
• Industry

Seller's Discretionary Earnings
The main factor of determining value for small and mid-sized businesses is the total cash flow benefiting the owner - also known as Seller's Discretionary Earnings (SDE). SDE is calculated using the following six categories:
1. Profit or loss as reported
2. Owner's Salary
3. Discretionary Expenses
4. Non-recurring Expenses
5. Non-cash Expenses
6. Expenses not included in the P&L

Once theses categories are added together and an SDE is developed, a multiplier is applied. The multiplier can range from 1 to 5 (or more), depending on many factors, to arrive at the appropriate value for the business.

Risk
The second valuation factor is the level of risk. Factors in this category include:
• Years in business and with the current owner
• Profit trend
• Quality of books and records
• Franchise membership
• Brand recognition/ strength
• Level of competition
• Dependence on current owner
• Diversification of customer base
• Lease length and terms
• Asset value

Terms of the Sale
This is the one source of value that the business seller can almost completely control. Components of the terms include:
• Down payment
• Interest rate
• Monthly payment
• Non-compete agreement
• Seller training of buyer

The majority of sales include the seller to provide some level of financing to the buyer of the business. With seller financing, the seller receives part of the purchase price at the time of the sale ("the down payment") and the remainder over several years. The buyer uses the cash flow from the business to pay off the debt. Structuring a sale with attractive terms can significantly increase the value of a business.

Industry
Certain businesses are valued at five (or more) times the seller's discretionary earnings while other businesses only bring 1 time. An important reason in determining the multiple of SDE is the industry of the business. Certain industries are more desirable than others. Factors influencing desirability include:
• The fun & ease of operating the business
• Location
• Facilities
• Employee relations
• Operating hours
• Growth potential

Valuing Your Business
To estimate the value of your business, we will consider all these factors, the selling prices of comparable businesses, as well as any other factors unique to your particular business that may make it more valuable. Contact us for a no-obligation estimate.

How To Contact Us
Should you have other questions or concerns about this site, please contact us.