A consulting client of mine asked me the questions below about owners carrying back a note and about a discount being applied if all cash is paid.
Here is what she asks:
"I have a few questions regarding buy-out pricing. We had talked once on the phone; I am buying a small graphic design firm.
The owner and I are close to a final price. I thought I had read one of your articles that stated 2 things:
1. 80% of all business buy-outs are financed by the current owner
2. If they are not (and mine wouldn't be) and the current owner requires cash upfront, a discount to the buy-out price applies."
First of all most business owners carry back some form of note on the sale of small businesses. Most notes carried back are between 10%-70% of the sales price. If an owner insists on all cash usually the "deal price" is dropped between 20%-40% of the non-cash price!•
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