AGREEMENT FOR SALE AND PURCHASE OF A BUSINESS

AGREEMENT FOR SALE AND PURCHASE OF A BUSINESS

by | May 25, 2020 | Selling a Business, Buying a Business

An ASPB (AGREEMENT FOR SALE AND PURCHASE OF A BUSINESS) is the most common form of SMB (Small to Medium-sized Business) sale agreement in New Zealand. It is an agreement to sell/buy assets used for operating a business identified as Tangible, Intangible, and Stock Assets – excluding creditor liabilities, cash, and debtor assets.

Standard TERMS OF SALE are changed and deleted, and FURTHER TERMS OF SALE are added to account for unique terms of a sale.

Some businesses are sold (in full or in part) as Shareholder Equity, a share (rather than ownership of specific assets) of ownership of the business Those sales normally include most (if not all) assets and liabilities of the limited liability company being sold, including cash, creditor liabilities, and debtor assets.

Agreement for Sale and Purchase of a Business Fourth Edition 2008 (6)Download
Agreement-for-Sale-and-Purchase-of-a-Business-Fourth-Edition-2008-6

Valuing $1M+ Businesses

Valuing $1M+ Businesses

by | May 25, 2020 | Buying a Business, Selling a Business

Valuing a business is a process of determining an appropriate measure of profit and a multiple to multiply it by to approximate the ROI a business valuation is based on.

Businesses are bought and sold based on ROI, the return/profit someone will earn from owning a business.

The strengths and weaknesses of the business assets to prosper in the opportunities and threats of the market help determine the multiple and the expectations of maintainable and growing profits.

Profits are determined by the historical financial performance of the business. Forecasting profits will be based on the historical profits plus expectations of maintainability and growth from the strengths and weaknesses of the business assets to prosper in the opportunities and threats of the market.

A $1M+ business valuation is based on multiples of EBIT (or EBITDA) rather than the EBPITD basis of buy-a-job business valuations.

Measures of Business Profit Used in Appraising a Business Sale Price

  • ROI is Return on Investment
  • EBIT is Earnings Before Interest and Tax
  • EBITDA is Earnings Before Interest, Tax, Depreciation, and Amortization
  • OCS is Owner’s Cash Surplus, also referred to as EBPITD
  • EBPIDT is Earnings Before Proprietors Income (wages or drawings) Interest and Depreciation. (This is sometimes called the Sellers Discretionary Cashflow.) This determines the basic earning capability of the businesses before any other variables – including 1. Net Profit before taxation 2. Proprietors income (including salary, wage, directors fees) 3. Any Interest paid 4. Any depreciation claimed
Valuing $1M+ Businesses

Valuing Small (Less than $1m) Businesses

by | May 25, 2020 | Buying a Business, Selling a Business

Valuing a business is a process of determining an appropriate measure of profit and a multiple to multiply it by to approximate the ROI a business valuation is based on.

Businesses are bought and sold based on ROI, the return/profit someone will earn from owning a business.

The strengths and weaknesses of the business assets to prosper in the opportunities and threats of the market help determine the multiple and the expectations of maintainable and growing profits.

Profits are determined by the historical financial performance of the business. Forecasting profits will be based on the historical profits plus expectations of maintainability and growth from the strengths and weaknesses of the business assets to prosper in the opportunities and threats of the market.

A small (Less than 1M+) business valuation is typically based on multiples of the Owner’s Cash Surplus (EBPITD) rather than EBIT (or EBITDA). These businesses are more buy-a-job businesses than larger businesses where the owner is buying an investment where they don’t need to work in the business rather than a job investment.

Measures of Business Profit Used in Appraising a Business Sale Price

  • ROI is Return on Investment
  • EBIT is Earnings Before Interest and Tax
  • EBITDA is Earnings Before Interest, Tax, Depreciation, and Amortization
  • OCS is Owner’s Cash Surplus, also referred to as EBPITD
  • EBPIDT is Earnings Before Proprietors Income (wages or drawings) Interest and Depreciation. (This is sometimes called the Sellers Discretionary Cashflow.) This determines the basic earning capability of the businesses before any other variables – including 1. Net Profit before taxation 2. Proprietors income (including salary, wage, directors fees) 3. Any Interest paid 4. Any depreciation claimed
Valuing $1M+ Businesses

Which Profit To Use for Valuing a Business?

by | May 28, 2020 | Buying a Business, Selling a Business

Valuing a business is a process of determining an appropriate measure of profit and a multiple to multiply it by to approximate the ROI a business valuation is based on.

Businesses are bought and sold based on ROI, the return/profit someone will earn from owning a business.

The strengths and weaknesses of the business assets to prosper in the opportunities and threats of the market help determine the multiple and the expectations of maintainable and growing profits.

Profits are determined by the historical financial performance of the business. Forecasting profits will be based on the historical profits plus expectations of maintainability and growth from the strengths and weaknesses of the business assets to prosper in the opportunities and threats of the market.

A $1M+ business valuation is based on multiples of EBIT (or EBITDA).

Smaller buy-a-job business valuations are based on OCS (Owner’s Cash Surplus, EBPITD).

Measures of Business Profit Used in Appraising a Business Sale Price

  • ROI is Return on Investment
  • EBIT is Earning Before Interest and Tax
  • EBITDA is Earnings Before Interest, Tax, Depreciation, and Amortization
  • OCS is Owner’s Cash Surplus, also referred to as EBPITD
  • EBPITD – Total Cash Surplus or Sellers Discretionary Cash of business including 1. Net Profit before taxation 2. Proprietors income (including salary, wage, directors fees) 3. Any Interest paid 4. Any depreciation claimed.