I'm wondering how others deal with inquiries from search funds.
My experience so far is that they waste a lot of time and I don't pay them too much attention.
Am I missing the boat?
I'm in the midst of a debate on the proper handling of Section 179 depreciation.
This is used when your accountant determines that a newly purchased asset qualifies for it. It allows you to expense (deduct) the full cost of the item the same year you buy it, up to a set limit.
$100,000 truck purchased with cash for business use. It might normally be depreciated over 5 years, offering a deduction of $20,000 per year for 5 years.
But using Section 179, you can take a deduction for the full amount in this tax year.
The question is how to treat that deduction.
Option 1. Like regular depreciation, include it in add-backs to find SDE. The entire SDE is subjected to the multiplier for that business in order to come up with an asking price for the business.
Option 2. Same as Option 1, but the Section 179 deduction is NOT subjected to the multiplier. It is simply added back un-multiplied to get SDE.
Informed opinions are greatly appreciated.
I've been a full time Business Broker (Main Street & LMM) for 6 years now and one of the things I learned pretty quickly is that when I list a business, especially one with strong financials, I get bombarded with inquiries from people who are entirely unqualified to buy.
In the interest of time management, I try to screen them out as quickly as possible. I do that by responding to incoming email inquiries by asking:
These are pretty effective. Do you have others?
I'm in an area where farms are common. I'm thinking of going after them.
It seems to me that the problem with a farm is that the debt service for 100+ acres of farm real estate will out strip the ability of the income to service that debt.
Yes, there is the opportunity for a USDA loan (Prime -2%, 40 year term), but others have told me that there are significant hurdles. There is also an opportunity (I think) for an SBA 504 (prime -2%, 25 year term).
I don't think that either of those offer enough of an impact on debt service to solve the cash flow problem.
For those here who have sold a farm successfully, what structure (aside of massive seller notes) worked for you?