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RareBrain Capital
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Buyers want to maximize their investment. The value of a company is generally a multiple of its earnings before income tax, depreciation, and amortization—or EBITDA. While the range of those multiples is set by the industry, there are aspects u
Finding the right balance of inventory is more than just having the right number of products in stock. It is predicting sales trends, analyzing costs, and obtaining contractual agreements with suppliers to lower overall costs. Inventory managem
The best way to prepare your business for selling is to think like a buyer. Gower Idrees, CEO of RareBrain calls this process reverse due diligence, which is similar to getting your house ready for sale. You don’t put a home on the market with
Many business owners assume that valuing a private company should only be done when they are ready to sell or if a lender requires a valuation as part of its lending criteria. But valuations are important beyond selling and lending purposes; th
You’ve worked hard to build your business and make it into a success. And now you’re ready to exit. It is human nature to be tempted to take your foot off the accelerator once it’s up for sale. Many business owners become mentally and emotional
The best way to prepare your business for selling is to act like a buyer. What a buyer wants is to minimize their risk and to feel confident that the company they are buying will continue to perform at a high level and sustain its growth and ca
Capital expenditures, also known as capital outlays, relates to the acquisition of capital assets held over a period of time, usually more than a year. This can include expanding a plant facility, upgrading equipment such as company fleet cars,
If you’re going to sell a business today, there’s a very high likelihood, depending on the type of business and the risks involved, that the buyer will want to pay some portion of the purchase price as an earn-out. An earn-out is essentially a
When selling their companies, business owners take the letter of intent stage entirely too lightly. A letter of intent document beyond spelling out deal terms is really a method of allocating risk between buyer and seller and coming to a compro
Business buyers do not like to see customer concentration issues in businesses. A customer concentration where an individual customer accounts for more than 20% of the gross sales can create substantial risk for the buyer. If there is a custome
A letter of intent (LOI) is sometimes also known as a term sheet or a memorandum of understanding. It generally gives a summary of the key terms of the sale transaction and is almost always non-binding except for confidentiality and an exclusiv
When selling your company, don’t be fooled by the purchase price alone. There is a lot more to it. Look under the hood and look at the total consideration offered for the purchase of your business. Don’t just stop at consideration, you also nee
When selling your company, it is best to negotiate many of the serious issues upfront. Some of these issues will need to be negotiated in the letter of intent itself and the rest in a purchase and sale agreement. Beyond price, the top issues in
It is very rare that sell-side advisors will discuss “sharing synergies with buyers” with their clients in a business sale transaction. What do we mean? And what are synergies? In the case of strategic corporate acquirers, there are often vario
Capital Expenditures (CapEx) is essentially all the money spent on fixed assets for your business and/or improving existing fixed assets of your business. So, how is CapEx relevant to the sale valuation of your business? Any smart buyer will be
Often business owners significantly underestimate due diligence as well as the role of due diligence in the preservation of the purchase price. It is common for due diligence to be very disruptive to the business being bought. Many times there
When selling your company, it’s important to lay out all deal aspects to determine the viability of an offer. These include price, consideration, structure, terms & conditions before closing and post-closing obligations. A classic example of th
When selling your business, generally the purchase price is determined as a multiple of the earnings. However, before the transaction actually closes, the seller can manipulate various aspects of the company without any impact to the company’s
When it comes to a business sale, outside of price and consideration, the only other main issue is risk. Often, buyers and sellers and their advisors will negotiate and allocate risk between the parties. From a seller’s point of view, they want
Most business owners do their utmost to minimize their taxes. As a result, the tax returns show the lowest amount of tax payable. But this depresses the true earnings of the company. When it comes time to sell the company, the financial stateme
Selling a business is usually a good-news, not-so-good news scenario. The good news for the business owner is that with careful planning they have just sold their company for maximum sale price. The downside is that if the business owner has no
Generally speaking, buyers prefer asset sales while sellers prefer stock sales. In an asset sale, the seller keeps possession of the legal entity and the buyer purchases individual assets of the company such as equipment, fixtures, and inventor
One of the more common mistakes business owners make is failing to optimize taxes before the sale of their companies happens. The result can be an unexpected, and often painfully large, tax liability. And don’t expect help from the buyer becaus
There are a number of reasons buyers prefer asset sales when buying a business. In an asset sale, the seller keeps legal possession of the company while the buyer picks and chooses among the various company assets from equipment, fixtures, and
It is critical for business owners to align their personal and family goals with their financial and business goals. That means business owners need to sync their financial planning with their exit strategy. It is not unusual for a business own
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