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5 Differences Between Financial and Strategic Buyers
5 Differences Between Financial and Strategic Buyers 940 627 Business Brokers

When you try to raise funding for your business or you are in the process of preparing to sell it, it’s important to understand the differences between financial and strategic buyers. This will help you understand the prospective buyer’s process of making a decision and determine which option suits you best. For your convenience, we have listed five key differences between financial and strategic buyers.

1. Defining the Investment Value of the Industry

Financial buyers typically spend an extensive amount of time building a view of the industry and your company within that industry. They might even hire a consultant to assist them with an analysis that will help them determine whether they want to invest in any company in the given industry in the first place.

In contrast, strategic buyers most likely already know everything about your industry and its current trends. They tend to spend less time evaluating the industry and focus more on the integration capabilities of your business.

2. Evaluation of the Business

Financial buyers are usually not planning to integrate your business into a larger company and evaluate the opportunity as a stand-alone entity. They are mostly interested in increasing the long-term value of the company quickly in order to ensure the desired return on their investment. Strategic buyers, on the other hand, will evaluate acquisitions based on how the business would fit in with their existing company.

3. Back-Office Systems

Financial buyers focus more on the chosen company’s existing back-office systems and their strength because they will need it to endure. Strategic buyers, however, are not as interested in this because these functions will typically be removed and replaced during the integration process.

4. Transaction Efficiency

When it comes to the efficiency of transactions, strategic buyers can often be slowed down by territorial division managers, bureaucratic committees, and the acquisition checks against internal projects, among many other things. Financial buyers are essentially in the business of making acquisitions, so executing deals in a timely manner is one of their fundamental abilities.

5. The Investment Horizon

Financial buyers often have an investment time horizon of around four to seven years. The period of time during which they acquire the business and plan the exit, will have a key impact on the return on their investment. On the flip side, strategic buyers plan on owning the business for an indefinite period of time, so they are less sensitive to business cycle risks.

4 Ways to Attract Buyers for Your Business
4 Ways to Attract Buyers for Your Business 940 529 Business Brokers

When a business owner decides to sell the business, one of the main questions on their mind is: “How will I attract buyers?”

After spending years growing the business, it can be scary to sell it because no one really knows how many buyers out there are looking for your type of business. In reality, there are plenty of potential buyers, you just need to attract them. Below we have listed 4 ways to attract the right buyer who will meet your expectations.

4. Maximise the Value

One of the most important things you should start with is making sure your business is a valuable asset that will catch the buyer’s interest. In order to drive the best possible selling price, you’ll need to focus on improving and growing your business. You can do that by increasing your profits, offering quality products, and, ultimately, showing that their purchase will be as low-risk as possible.

3. Identify What You’re Looking For in a Buyer

Most business owners looking to sell the business have various objectives that go beyond the desired purchase price. And the definition of the “best buyer” can vary significantly depending on the seller’s objectives. So in order to target the buyers that are the most suitable, it’s essential to identify and understand your objectives first.

2. Tidy Up Your Books

You should always keep in mind that buyers are looking for objective figures and facts that will assure them that your business is a profitable investment. This means you’ll need to provide them with organised documentation and bookkeeping. Financial records need to be prepared in accordance with generally accepted accounting principles. Several years of audited financials show you and your business in a very positive light and can increase your selling price. Here are some of the many documents you should prepare for your business sale:

  • Cash flow statements
  • Current balance sheet
  • Profit & loss statements
  • Tax returns
  • Forecasts

1. Work With an Expert

The easiest way for you to attract buyers is by working with a business broker. Business brokers manage thousands of buyer relationships and have the expertise to guide a transaction to a close. They have a pool of both financial, as well as strategic buyers, many of which you may not have known exist. Working with an expert can also save you time and provide you with more favourable transaction terms and the best selling price.

Are you looking for a hassle-free way to sell your business?

Free Business Brokers enables Australian business owners to list their businesses for sale for free. Contact us today for more information or to list your business today!

How to Choose a Business That’s Right for You
How to Choose a Business That’s Right for You 940 600 Business Brokers

Once you’ve decided to start an entrepreneurial journey, the first step is deciding which type of business you want to start. From restaurants and retail stores to automobile manufacturing, there are many options to choose from. But how do you choose a business that’s right for you? Read on and find out!

Identify the Industry

The first step towards finding the right business to start is to brainstorm. Start by gathering ideas and discover what you’re truly passionate about. Turning a personal interest into a business is a great way to do what you love and make money in the process.

Do Your Research

Once you’ve determined the industry you’re genuinely interested in, it’s time to do your research. Having a passion for what you do is important, without a doubt. However, don’t forget to look at the reality of the current market. Perform market research to find a need that hasn’t been met yet and create a business to fill it. This can involve a number of needs: geographic, financial, or a need for a specific service or product.

Another important step to take is researching other business models and types of businesses within the chosen industry to understand the competition.

The research process will help you evaluate the market potential for your business before actually starting it. Matching genuine interest in the industry with a consumer need and good market potential is an ideal starting point for any business.

Finance Options

Once you’ve determined the desired industry and market potential and need, it’s a good time to find out how much you’ll need for your startup funding. Determine the total cost of starting your business and how long it will actually take you to start profiting from it.

Take an in-depth look into your personal funds to get an idea of how much you already have in your existing savings and whether you’ll need third-party financing, such as a bank loan or investment.

Final Thoughts

Starting a business can be a risky and complicated process, especially if it’s done in a rush. When considering embarking on a journey of entrepreneurship, it’s important to take all aspects into consideration. As such, figuring out the details, such as the desired industry, market potential, and financial limitations, is a step that shouldn’t be overlooked. If all the preparation work is done, however, starting a business can be a very exciting experience.

Common Business Sales Myths
Common Business Sales Myths 940 600 Business Brokers

For most business owners, selling their business is a huge decision. And when you enter the business sales grounds, you might find that there are many myths about selling a business that are based on a singular transaction. Keep reading to find out some of the common myths!

You Will Receive the Full Asking Price

Receiving the full asking price in cash is a rare sight. Professionals usually consider the asking price as subject to negotiation. The final price you will receive will be a figure that’s mutually satisfactory and often below the original price.

You Can Sell Your Business Without Any Help

Some entrepreneurs have been lucky to arrange a sale through their own network. However, that’s not the case for most business owners attempting to sell the business independently. You’ll most likely have to try out many different ways to find a prospective buyer. This is where the services of a professional business broker can come in handy. An expert can offer you valuable advice and promote your business to sell faster at a good price.

Your Business Will Sell Within a Few Weeks

There have been stories of owners selling their business practically overnight. However, these success stories should never be taken as a rule of thumb. Realistically, it can take months to attract the right buyer. Not to worry, though. Keep in mind that finding a buyer that will meet all of your objectives and selling at a suitable price takes time.

The Company Is Ready to Sell Anytime

Before listing your business for sale, there is plenty of work to be done. Contrary to what many people may believe, a significant amount of time and energy needs to be put into preparing your business for the marketplace. Even the most prosperous business owners often spend months or even years increasing the value of their business, organising financial records, and carrying out other tasks that affect the chances of a successful sale.

Final Thoughts

As you now know, there are plenty of myths surrounding business sales that you should be aware of. Selling a business is not an easy task to undertake and it can take a while to find the best buyer. However, if done correctly, you’ll be looking at a successful sale soon enough!

6 Reasons to Buy a Franchise
6 Reasons to Buy a Franchise 150 150 Business Brokers

Buying a franchise can be an exciting venture. A well-designed franchise system can be an excellent way to expand or buy a new business. So why exactly can this option be beneficial for you? Below are the top 6 reasons why you should consider investing in a franchise.

6. Proven System

When you purchase a franchise, you’re not only investing in a functional business but also an entire business system. Typically, franchises have a system in place that is followed when distributing the services or products. An existing system that is proven to work will prevent many common errors that a business owner can face. There is also a higher chance of running a successful business from the start.

5. Easier to Get Approved for Funding

You are more likely to receive a loan to finance your purchase. Lenders are inclined to provide you with funding for a successful business that already has a proven track record because it poses a lower risk of repayment default. What’s more, some franchise systems may also provide leasing or financing options.

4. Easier to Get the Business up and Running

Getting a business up and running from zero can be time-consuming and pose various obstacles, such as defining negotiating terms, picking the right location, establishing vendor relationships, and obtaining funding. Buying an existing franchise can save you time and energy by having established functional systems.

3. Lower Risk

Opting for a franchise will help you steer clear of the many risks associated with starting a new business. During the due diligence process, you’ll be able to gain as much knowledge as possible about what will happen when you become the owner and avoid unwanted surprises.

2. Training Programs

Many franchise companies provide training programs to bring you up to speed on the best methods to run the business. Training will ensure that you operate the business efficiently, using effective strategies that have worked in the past.

1. Assistance With Marketing

The franchisor typically provides you with marketing assistance. The staff will assist you with developing marketing strategies with the help of their tools in order to attract and retain customers. You will have an outline, marketing materials and graphics to follow to market the franchise in the most efficient way possible.

Bottom Line

As we can see, there are many reasons why purchasing a franchise can be advantageous for any entrepreneur. From proven systems to higher chances of obtaining finance, becoming a franchisor can be an excellent, lower-risk option for those looking to expand an existing business or purchase a new one.

How do you show value to customers?
How do you show value to customers? 150 150 Business Brokers

Here are 5 steps you can take:

  1. Understand what drives value for your customers. …
  2. Understand your unique value proposition. …
  3. Identify the customers and segments where are you can create more value relative to competitors. … (market and competitor analysis
  4. Create a win-win price. …
  5. Focus investments on your most valuable customers – apply 80:20 rule.
Essential to build good business relationships!
Essential to build good business relationships! 150 150 Business Brokers

Great business relationships aren’t as mysterious or complicated as you might think.

  1. Set a positive tone for your company (culture).
  2. Know your unique value proposition.
  3. Find win-win for both parties.
  4. Err on the side of humility.
  5. Embrace your own personality.
  6. Manage client expectations – don’t over promise and under deliver.
  7. Keep the lines of communication open.
Basis of Business Breakeven
Basis of Business Breakeven 150 150 Business Brokers

Break-even is an economic condition that occurs when the difference between a firm’s revenue and cost is equal to zero. Simply put, break-even is the minimum level of needed for a company to not to go broke!
Break-even looks are both Fixed and Variable costs, as well as Income. Fixed cost don’t change (eg., Rent). Variable goes up and down with Income (eg., Wages).
Do you know your Break-even in Dollars and/or Units sold?

Sell my Business Australia
Sell my Business Australia 150 150 Business Brokers

How much profit should a business make?

Profits are hard to come by – Profit ranges from 5 percent for a startup to 20 percent for a mature, established $10 million-plus business.

As a business grows it has to start hiring more people. Each employee in a small business drives the margins lower.

One study found that 90% of all service and manufacturing businesses with more than $700,000 in gross sales are operating at under 10% margins when 15% to 20% is likely ideal.

What is Earnings Before Interest and Taxes EBIT?
What is Earnings Before Interest and Taxes EBIT? 150 150 Business Brokers

In accounting and finance, earnings before interest and taxes (EBIT) is a measure of a firm’s profit that includes all incomes and expenses (operating and non-operating) except interest expenses and income tax expenses.

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