Capitalization Rates For Business and Real Estate Transactions

Here is a video that shows how real estate investments compare to businesses investments and how they are measured. One can see the big difference in typical market valuations by looking at the capitalization rates, or cap rates, which are very different between the two. Cap rates, which are used more in real estate, correspond directly with our multiples in business acquisitions. https://youtu.be/bdp6wIUqETE ...
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What Should I Buy: A Big Company or Small?

Here is a problem I see a lot. A first time buyer is not sure whether he should go big or small when he buys his first company. He doesn't know what he should be looking for. The first impulse is to raise capital and buy something at the $10-$20 Million level. Let's define this as a big deal although we know there are much bigger ones out there.. Now ...
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Buying Online Businesses Vs Buying Offline Businesses

https://youtu.be/ZeiHjq9e4Lc?list=PLxalQfCciZxFWxwcZZ_riOlkz9o20QQmh This blog deals mostly with buying offline businesses, or as they call them nowadays, bricks and mortar businesses. Buying an offline business is the traditional approach with its own strategies and metrics. I teach a segment of that in the bigger markets(LBOs) but also we tackle smaller traditional deals as well.  ...
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Should I Start A Franchised Business?

Should I start a franchised business? This is what I was asked recently. So I received a communication from my favorite online business broker today. To my surprise this had to do mostly with franchises. They were pushing a California startup Mexican restaurant franchise group. This was quite enlightening since I had just been communicating with a bunch of my students regarding franchises. In fact one of my students asked ...
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How to Buy a Business Which Has Debt.

Unfortunately most businesses have some kind of debt on the statement. Buyers don't always know what to do when they see it. When I say statement I mean financial statement and by that I mean balance sheet. Most companies have some sort of loans, liabilities, or other types of contingencies on the balance sheet. It comes with the territory. This is what happens when you own a business. You are ...
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The Family Business Seller’s Dilemma

It is true that baby boomers are becoming a bigger factor in selling businesses. Just as there were many post war Sellers in the nineties, there are now a plethora of older generation business owners that must exit sooner or later. They might be able to close the business but that is not a desirable option. For these older owners, selling to family members is the best way to pass ...
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Deal Criteria – The Optimum Range of EBITDA

So I think I will do a few posts on deal criteria because people always ask me about it.  In this post I will talk about the range of earnings that a company should have for it to be on my radar.  I should point out that I always change this criteria depending on the day of the week, my mood, the stock market, and if I'm having a bad ...
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