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Business Brokering
Newsletters Courtesy
of
Broker Service
Network Inc. II
Index
Understand the
business brokers businesses
for sale.
Our business brokers
experience too many buyers who
concentrate on gross sales
without proper knowledge of
the basic operating expenses
to profit on businesses for
sale (cash flow). If you are
unsure, ask your business
broker - all business brokers
should be able to explain -
what type of expense ratio
does that industry have. You
can also determine it by
reviewing the businesses for
sale financials BUT mostly
it's common sense. This is why
we urge you to ask the
business broker what the cash
flow is on their businesses
for sale and how it was
determined. CASH FLOW and not
gross sales is your true
barometer.
The ratio's are
not absolute but do provide
insight as to whether a gross
sales figure is good or bad.
For instance, a Laundromat
with $120,000 gross sales
might not seem profitable. But
understanding that type of
business shows that a standard
Laundromat has just a 25%
expense ratio meaning that of
the $120,000 in gross sales,
the owner profits $90,000!
Why, because they are usually
manned by one person and the
highest expense is utilities.
When
determining this ratio, you
may need to add lease or loan
payments depending on the type
of sale. But first check the
expenses, these figures may
already be included. We
provide basic operational
expense to gross sales ratios
below on common businesses
that sell. These ratios are
based on our business brokers
experiences not nationally
reported figures. These are
not absolute but should help
guide you - represented as
breakdown to 100% of gross
sales (expense/profit)
-
Laundromat
(25/75)
-
Service
(30/70)
-
Dry Cleaner -
plant and/or drop off
(65/35)
-
Retail
(70/30)
-
Restaurant
(70/30)
-
Basic Small
Manufacturing (85/15)
-
Wholesale/Distributorship
(depends on the arrangement)
Keep in mind
that the ratio is directly
proportionate to the gross
sales. The higher the gross
sales - the more expenses
needed to operate BUT also the
higher the profit. IE: a small
manufacturing company with 2
million in gross sales may
only have a 15% cash flow
(profit) but that figure would
be $300,000 in annual profit.
Our business
brokers have run across too
many buyers who say that the
"gross sales are not enough"
on the businesses for sale. We
would prefer to hear that "the
cash flow was not enough".
BSN has certified all business
brokers in our network
Talk to your broker about
this newsletter
ALL BSN business brokers
have completed our
comprehensive 3-day training
seminar and are active
members in our ongoing
training and vast support
network.
We train and support
business brokers throughout
North America with the most
comprehensive network in any
industry. BSN Brokers
complete a 3 day
comprehensive training
certification program then
find his or herself
supported and backed by toll
free support, the world's
largest interactive broker
network and/or any other
help they need to succeed.
Brought to you by certified
brokers of
Broker
Service Network Inc.
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