Arizona Business FAQs
We frequently find ourselves answering the following questions. Your questions are important to us. Call a WCI Broker to get more comprehensive information and assistance regarding your search. Trust the best - a WCI Broker has a long history of solid, professional business experience and knows how to complete Arizona business transactions.
Why should I buy a business through WCI Brokers?
WCI offers a complete program of high-quality, professionally-licensed, services covering all major elements of buying, selling, and financing transactions. We have completed many successful transactions in Northern Arizona – far more than any other business brokerage in Northern Arizona communities and are uniquely qualified to help buyers find the right business opportunity.
How do I, as a seller, and the WCI broker work together?
The successful transfer of business ownership benefits from skillful coordination and “good faith” collaboration between buyer, seller, and the broker. The burden of skillfully and responsibly managing the transaction rests with our Arizona business brokers. Cooperation between buyer and seller is necessarily important for the exchange of operational and financial information. Full disclosure of all material facts is expected from all parties, they must respect the confidentiality of the information and knowledge exchanged.
How can a Buyer finance the purchase of a business?
WCI Brokers are highly experienced and knowledgeable about SBA lenders and other financing options.
Sellers often provide “seller-financed” or “carry-back” loans to buyers of their businesses. Because the seller is assuming more risk, sellers typically hold firm on selling price. Sellers also carefully consider the buyer’s financial strength and background in their decision to accept a promissory note and security agreement from the buyer.
WCI Brokers help structure a seller-financed transaction. There are many ways financing is achieved – it all depends on how the deal is structured and the respective motives of buyer and seller.
WCI Brokers work closely with buyers to explore all available options, although the broker is paid by, and exclusively represent, the seller.
How long does it take?
It depends on the type and complexity of the transaction. We have assisted with closing transactions in as quick as two weeks, but most require one to two months or more.
WCI Brokers consider timeframes and manage the schedule to expedite the process and meet the needs of the bank, buyer, and seller.
Will a new lease be necessary?
A new lease will not always be necessary if the purchase of real property is part of the transaction. If the seller leases the current premises from someone else, then a new lease, a lease
assignment, or a sublease will be required. The terms of the lease are negotiated between buyer and lessor and finalized before the transaction is complete.
WCI Brokers assist in the negotiation of lease agreements between parties.
What contingencies should I expect in a purchase contract?
The specification and satisfaction of contingencies are an important part of any transaction. The nature of the deal and type of business will determine which contingencies are included in the
Purchase Contract. Those most common relate to books and records examination, leases, approval of financing, and others as appropriate.
WCI Brokers understand contingency requirements well and work closely with buyer and seller to clarify and specify exactly which contingencies need to be addressed in the transaction.
Does the Seller help the buyer after the transaction closes?
Almost all WCI Brokered transactions have some provision for the seller to familiarize the buyer after the sale. WCI Brokers identify and structure mutually acceptable terms for seller involvement during and after the transition to new ownership.
What is goodwill (Blue Sky)?
Traditionally, “goodwill” refers to the value attributed to the relationship between the business as a going concern and its customers. Frequently other factors that contribute to the success of a business are labeled “goodwill” (see Other Factors, below). WCI Brokers identify how goodwill relates to the business of interest.
What other factors contribute to the value of a business?
Depending on the specific business, one or more of the following impact the value, hence the selling price of a business, to greater or lesser extents: owner’s cash flows, relationship with suppliers, contractors, and manufacturers; history of the company; favorable leases; business location(s); years in business; community economic growth potential; stability, quality, and number of staff; financability of the purchase; the completeness of books and records; quality of assets; uniqueness of art or science of products and services; transferability of goodwill; barriers to entry; and favorable industry trends. WCI Brokers help you understand how these factors affect the value of a business.
How is the fair market value of a business determined?
The definition of “fair market value” of real or personal property is the price at which the property would change hands between a willing buyer and a willing seller when the former is not under
any compulsion to sell and both parties have a reasonable knowledge of the relevant faHow is the fair market value of an Arizona business determined?
The definition of “fair market value” of real or personal property is the price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to sell and both parties have a reasonable knowledge of the relevant facts.h the fair market value of a business.
What is Owner’s Cash Flow?
Owner’s Cash Flow (OCF) is the discretionary cash generated by a going concern that is available to the owners to spend; including, net income or earnings before income taxes, depreciation, interest on debt service, and all other forms of owner compensation and perquisites. OCF best reflects the return a new owner will realized from a capital investment in the going concern. WCI Brokers review all OCF calculations with you in detail.
Why is Owner’s Cash Flows (OCF) more important in determining fair market value of a business than simply taking the sum of all the company’s tangible and intangible assets?
Using OCF in the valuation of a business is based on the premise that a going concern is only worth what it currently earns from the application of all its tangible and intangible assets. WCI Brokers show you how this principle applies to any business of interest.
How much does a business really make for the owner (Owners Cash Flow)?
Although this frequently asked question is not easily answered by buyers, business owners, accountants or consultants, some line items appearing in P&L statements and income tax returns are always considered in the amount of money a business makes for its owner. Using OCF in the valuation of AZ businesses for sale is based on the premise that a going concern is only worth what it currently earns from the application of all its tangible and intangible assets. WCI Brokers show you how this principle applies to any business of interest.
How much does a business really make for the owner (Owners Cash Flow). Most owners actively manage their businesses with the intent of maximizing personal financial benefits and increasing the Fair Market Value of their business as it grows and prospers over time. They also employ intelligent and thoughtfull business practices to decrease taxable net income, thereby increasing their financial net gain.
Some common ownership benefits and tax-deductible expenses which benefit owners directly include:
- Salaries and bonuses paid to owners and officers
- Payments into retirement and pension programs for reinvestment
- Net profits and retained earnings from business operations
- Cash money received from certain sales
- Interest paid to lenders or previous owners on debt assumed by the business
- Personal health, life, auto, and liability insurance costs
- Personal vehicle expenses either paid or leased by the business
- Travel, vacation, educational expenses combined with business activity and pleasure
- Amortization for covenants not to compete, goodwill, building improvements, etc.
- Depreciation of assets [for assets having expected lives longer than their respective depreciation schedules]
- Rent paid by the business for equipment or real estate leased to the business by the owner
Competent buyers, business brokers, and accountants include all direct and indirect financial benefits to the owner when determining how much money the business makes for the owner. WCI Brokers explain “Owner’s Cash Flow” statements that appear in most business profiles produced by WCI Brokers.
Where can I get more information about Arizona communities?
In general, community Chambers of Commerce, economic development organizations, Arizona state government departments, AZ business brokers, and accountants can provide valuable information on Arizona communities you may be interested in. When purchasing a business knowing the community where the business is located is important. You need to know your customer base which includes the demographics of the community. You can base your marketing/advertising on the information you gather on the business community. WCI Brokers can assist you in gathering this information and are familiar with the communites the businesses they represent are located in.