Negotiating for Outrageously Overpriced Things | How to Buy a Business
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- Опубликовано: 27 июл 2014
- I discuss a business buyer who is trying to negotiate with an unrealistic seller. What strategies would you use to try to get the seller to see that they're being unreasonable?
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Learn how to buy an already-successful and profitable business in a risk-reduced way: www.BusinessBuyerAdvantage.com
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Learn more at www.DavidCBarnett.com
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About ME: My name is David C. Barnett. I am a consultant and I work with entrepreneurs around the world to buy, sell, and organize their small to medium sized businesses. As a former business broker, I have seen many people do bad deals and lose their life savings as a result. So, I made it my mission to start this channel to help educate people on ways to invest smarter and to ask questions, so they don’t get trapped into doing bad deals.
I am also an author and written books such as Invest Local: A guide to superior investments returns in your own community. My most recent book is Smarter than a Startup: The Risk-Reduced way to get the business of your dreams up and running. Other titles include, How To Sell My Own Business and Franchise Warnings: What you really need to know before you buy. All titles are available here: www.investlocalbook.com/p/buy...
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David, you are a TREASURE-TROVE of hard-to-find info. I say this as an professional investor playing the same game u talked abt at end of your video
Thanks for the kind words egdapo.
I am after buying a business and your videos are making me confident and literate..
Thanks so much Khandakar. If you want to buy a business, you really should invest in my online program at www.BusinessBuyerAdvantage.com It's 9 hours of video tutorials and is the least expensive way to learn a ton about how to do this properly and protect your investment. Cheers.
Appreciate the info I feel like it is a reinforcement of common sense. I have went through four deals where I have sent back my evaluations (graphs, spreadsheats, and alternate business/cashflow scenarios) and stilll the buyers think.. "oh this is worth blue sky to the mile". Its an interesting game out there. All sellers think you should take out crippling SBA money for anything under 150k cash flow and not great business structures.
Many sellers get drawn into the stories of 'big exits' and it skews their expectations.
Thanks for your good work David, watched hours of your vids do far and all make a lot of sense.
Thanks Paul. If you'd like to help out, don't forget to hit the 'like' button and share your favourite videos on social media such as Twitter, FaceBook, etc.. it helps the information reach the people who need it.
I just love your work. Thanks so much!
Glad you enjoy it!
Glad I stumbled upon your videos the other day. Very informative!
Thanks, glad you could join us. Go to www.DavidCBarnett.com and sign up for the email list and you'll always get the latest videos.
Great video David! Very much appreciated!
Thanks Mel
Great video David. I'm still working through your business buyer advantage course, learning a lot and finding out what I don't want to do as well as what I want to do. It is an excellent course, thanks.
Thanks for the kind words Victor
Almost have this exact situation right now! Mind boggling an "expert" valuation company can put these numbers out there
They don't have to try to buy it. AND- they likely made the seller feel really good about their business. ;)
Great info thanks!
Thanks Mike
Awesome content, thanks for sharing knowledge and insight!
Glad you enjoyed it!
Never experienced this before! Lol......Great Video
Thanks David
As always...sound buyers info.
Thanks BizUp
What about giving them exactly what they want but over a much longer time period?
Oh and as you say. Have them contact the bank and see what they would finance. And the play dumb trick.
Isnt that smart in any case though. To have them explain the valuing. That way the deal will be more fair and future deals come to you more
Another great video!!! Question -- if the seller has trouble collecting receivables, and credit sales are a significant portion of the EBITA or SDE calculation, how might you go about trying to determine how much to reduce the price?
When doing the normalization of the income statement you just need to make sure the bad debts expense is reasonable for the situation. ie, if they're sandbagging bad receivables and not writing them off to make the income look better, you just add in the write off to make it fit with the situation. This will lower the cash flow that you base the price on. Learn more about normalizations in my online course at www.BusinessBuyerAdvantage.com it's step #2.
@@DavidCBarnett Great idea! Thank you!
Thank you #newsub #justsubscribed
Just found you. Looking to buy the family business and I have no idea if I'm getting screwed it not. I know you mentioned some stuff at the end, but what's the best stuff to read on this topic? Thank you.
The best thing to do if you have a specific deal at hand is to get me to do a Buyer Insight Analysis. Write me at dbarnett (at) alpatlantic (dot) com and I'll send you a pdf outlining my services. Cheers.
Somebody has to explain the "capital asset pricing model" to the seller. All ebitda producing assets fall along a straight line with positive slope when your vertical axis is risk and your horizontal axis is return. At the lower end are T-bills at the upper end you have lottery tickets. He could only get that price if it was a solid very stable business like with a reserved territory, a patent or some other strategic advantage over its competition. Your strategy of asking for a reasonable explanation seems good. Showing him the "asking price/ebitda" ratio of other businesses for sale might educate him somewhat. Oh, this is from 2014 he he he...
Sometimes the buyers are just as uninformed. It's what makes this an exciting industry. I was making videos in 2014! wow... time flies.
Is the 40% expected return on buying a business "cash on cash" or is it total cash investment/ purchase price?
Vids are awesome, thank you.
Hi Greg. Firstly, this is a rule of thumb and shouldn't be relied upon for a specific subject company. Return on investment means the return from all capital invested, regardless of source. Sometimes with small businesses we're talking about the SDE being the 'return' which includes the owner's labour. Cash on Cash return would be 'Return on Equity.' ROE should be much higher! Watch some of my videos on WACC.. ruclips.net/video/vTsIwe_If88/видео.html
Great answer.
Excellent video, my wife and I are currently looking into an entertainment business. We have both known owner for over 30 years. Like this video, the owner has envisioned a price tag of $1.2 million. The SDE is around 250,000 per year. EBITA of roughly 155. Even at a times two multiple it would be valued around $500,000. Perhaps I am missing something but where do you take into account the value of the physical assets? In this case, roughly 30,000 square-foot building? Is that typically added onto the $500,000 valuation?
No, you need to separate out the real estate. It's a different class of asset. If you're actually looking at doing this deal, you should get me to do a Buyer Insight Analysis or at a minimum do the online course at www.BusinessBuyerAdvantage.com which will teach you how to normalize the income statement.
Thank you for getting back to me. I am currently looking into your course and plan on taking it. Once complete I will reach out.
This content is a true gem. Thank you Mr. David. Why does this video has so low views number?
Well, my channel isn't monetized so RUclips has little incentive to share the content. I rely on viewers like you to like, comment and most importantly, share the video to other platforms like facebook or twitter. Glad you enjoyed it.
I would always want to know where the price of the business was calculated
Usually in these cases it's an 'aspirational' price.
My big takeaway from this video is that the Accountants who are giving piss poor business financial projections should be DISBARRED and not allowed to practice EVER again. Didn't they go to school for this?? Smh
No, they don't. Accountants go to school to learn how to make financial statements and fill in tax returns. They are not business valuation specialists. Most good accountants will tell people they don't know how to value a business but some will take money for anything. Business people have to learn how to spot good and bad advice. Caveat Emptor.
4:13 I think you ran someone over. Maybe best not to drive and blog. Just a thought.
Yeah, no kidding. I haven't done a 'driving' video in years.